portions of this book were previously published in 1996 by random

Portions of this book were previously published in 1996 by Random House(Times Books) as Power Plays. Here’s what the reviewers had to say aboutwhat you’ll discover in How to Win Any Negotiation Without Raising YourVoice, Losing Your Cool, or Coming to Blows.

The book “is packed with relationship strategies that will connect you morepersuasively and effectively with customers, employees, even competitors.”

—Success magazine

“Bob Mayer is a well-known Los Angeles attorney who has practiced foryears in the thick of the toughest negotiating environments….What really setsthis book apart is …’The Deal-Maker’s Playbook.’ This section lays out thebroad outlines of many common and specific negotiating situations. Youprobably will benefit if you find yourself in one these situations in the nearfuture: negotiating the purchase or lease of a new or used car, house, or appli-ance; and dealing with employers, cohabiters, soon-to-be spouses or ex-spouses,the IRS, landlords, and many other potential adversaries or collaborators.”

—BookPage, America’s book review magazine

“Mayer’s view…is to plan several movies ahead, ‘making offers and counterof-fers which will naturally lead to the other person’s propensity to accepted yourprecalculated compromise proposal…. Expert tips for effective negotiating.”

—Chicago Tribune

“Imagine picking up a book that will, through simple examples, show youhow to be a power person, a deal doer and a winner….Mayer provides theconfidence to negotiate without fear, knowing that you’re prepared for any-thing the opposition can throw your way.”

—News-Herald Newspapers

“We like the straightforward, no-nonsense style. Thanks for a valuable refer-ence tool!”

—Small Business Opportunities magazine

“He has negotiated for actors, authors, and athletes, in addition to corporateclients. Drawing on his experience ‘doing deals’ he offers his secrets here.”

—Booklist magazinepublished by the American Library Association

“Mayer describes “intriguing ways to break a deadlock or come up with hardfigures acceptable to both sides.” .…He “really finds his voice in the section hecalls the ‘Playbook’, a list of ‘tips, tricks and tactics’ for negotiating discountson appliances…, surviving an I.R.S audit and…much, much more.”

—The New York Times

“A primary selection.”

—Executive Book Club

And here’s what others had to say….

“The ideal how-to-negotiate primer and a must-read for every dealmaker ordealmaker-to-be.”

—Al Lapin, Jr., Founder,International House of Pancakes (IHOP);Past president, International Franchise Association

How to W in Any

Losing YLosing YLosing YLosing YLosing Your Cool,our Cool,our Cool,our Cool,our Cool,

or Coming to Blowsor Coming to Blowsor Coming to Blowsor Coming to Blowsor Coming to Blows

R O B E R T M AY E R

THE CAREER PRESS, INC.

Franklin Lakes, NJ

Author of How to Win Any Argument

NegotiationWWWWWithout Raising Yithout Raising Yithout Raising Yithout Raising Yithout Raising Your Vour Vour Vour Vour Voice,oice,oice,oice,oice,

Copyright © 2006 by Robert Mayer

All rights reserved under the Pan-American and International Copyright Conventions.

This book may not be reproduced, in whole or in part, in any form or by any means

electronic or mechanical, including photocopying, recording, or by any information

storage and retrieval system now known or hereafter invented, without written

permission from the publisher, The Career Press.

HOW TO WIN ANY NEGOTIATION

Cover design by 12 E Design, Howard Grossman

Printed in the U.S.A. by Book-mart Press

To order this title, please call toll-free 1-800-CAREER-1 (NJ and Canada: 201-848-

0310) to order using VISA or MasterCard, or for further information on books from

Career Press.

The Career Press, Inc., 3 Tice Road, PO Box 687,

Franklin Lakes, NJ 07417

www.careerpress.com

Library of Congress Cataloging-in-Publication Data

Mayer, Robert, 1939

How to win any negotiation without raising your voice, losing your cool, or

coming to blows / by Robert Mayer.

p. cm.

Includes index.

ISBN-13: 978-1-56414-920-6

ISBN-10: 1-56414-920-X

HD58.6.M379 2006

658.4’052—dc22

2006012476

www.careerpress.com

My life at home is shared with a caring and beautiful woman,

my wife, Beverly.

My life at work is shared with two caring and talented lawyers,

my daughter, Melissa, and my son, Steve.

It is to them that this book is dedicated with love.

This page intentionally left blank

Acknowledgments

The book you’re holding was a great critical success. One reason wasKarl Weber’s insightful editing. Though updated and retitled, you will feelKarl’s artful touch on every page.

If your first wish is to write a great “how-to” book, then your secondwish should be to have an agent with Mike Snell’s savvy and sense ofcommitment.

Karl and Mike, I again thank you.

Contents

Introduction: So You Want to Tilt the Playing Field........................................ 13

PART I Soft Touch: Finessing, Influencing, and Persuading Others

1 Winning Is a Mindset: The Great Wallenda Effect....................................17

Winning begins with your inner self.

2 Linkage: The Stealth Factor.................................................................19

Linkage strategies are relationship strategies designed to make it possiblefor you to lead and persuade.

3 Alignment: Soar Points.......................................................................25

Alignment techniques play against and harness the other person’s energywhile establishing a pattern of agreement.

4 Needs: Making Your Ideas Irresistible...................................................29

In the quest to satisfy our psychological needs, we are guided by emotionrather than reason. It is this quest for satisfaction that energizes the persuasiveprocess.

5 Control: How to Listen So People Will Talk and Talk So People Will Listen.....33

There is a quantum difference between speech and persuasion. Speaking isabout giving out information. Persuasion is about getting through. It is aboutcontrol.

6 Evaluation: Finders Keepers, Losers Beepers.........................................39

The right communication tactic may be to initiate a call or it may be topostpone a caller’s invitation to talk. And then it may be to send a fax. Orcall a meeting. Or send a letter.

7 Reading: People Are an Open Book......................................................43

To be able to persuasively present your ideas and to prevent resistance youmust read how the other person makes decisions. How they make senseof things. It may not be the same as how you make sense of things.

8 LANCER: Postcards From the Top..........................................................49

You have won a nod of acceptance. But victories are fragile. The tactics forbeing a good winner now come into play.

PART II Trouble Shooting: Settling for More

9 Finessing Hostility, Aggression, and Anger: Dancing in the Minefield..........53

People who are hostile, argumentative, or angry are unreachable. Standingup to irrational people is the norm. Finessing people who insist on beingright rather than reasonable is the art.

10 Overcoming Rejection: Riding the Crest of a Slump.................................57

Rejection is a negative response. But a response by definition means thelines of communication are open.

11 Running Through Walls: The Trying Game..............................................61

A stonewall mentality is much more difficult to manage than rejection.When you are stonewalled the lines of communication are slammed shut.

12 Finessing Worth, Value, and Share Differences: Waging Peace.................67

Worth, value, or share differences are sometimes best dealt with by negotiatingan approach rather than negotiating a position.

13 Finessing People Who Would Rather Be Right Than Reasonable:

Slow Squeezing............................................................................... .71

Many disagreements are not so much about money as they are about fairness.

PART III Hard Bargain: Winning When the Score Is Kept in Dollars

14 Analytics: Choice Points......................................................................79

Will your negotiating strategy be overreaching or moderate? Will the tacticsyou choose be rigid or accommodating?

15 Relationships: Walking Between the Raindrops......................................83

Analytic: The relationship you have or want to have with the other personwill impact your negotiating goal.

16 Power: The Insurmountable Opportunities Factor....................................89

Analytic: The relative balance of negotiating power will impact your negotiatinggoal. Understanding power is understanding what it is, how it is created,and how it is lost.

17 Basic Training: Bombs-Away Bargaining and White-Knuckle

Horse Trading...................................................................................93

Playing for keeps. The art and psychology of the rough and tumble, thedown and dirty.

18 Mind Tricks: The Squish Factor...........................................................103

Manage how the other person feels about themselves and you managehow effectively they will negotiate against you.

19 Sliders and Curves: Hold-on-to-the-Roll-Bar Negotiating........................111

Some tactics just aren’t as pretty as others.

20 Timing, Tempo, and Turbocharging: Making Time Your Ally.......................121

Time can be your worst enemy or your best ally.

PART IV The Deal-Maker’s Playbook:Low-Impact, High-Yield Tips, Tricks, and Tactics

Thirty-six common negotiating encounters: What to look for. What to do.What not to do.

Apartment Lease.............................................................................129

Appliances.....................................................................................132

Automobile Lease............................................................................135

Automobile—New.............................................................................140

Automobile—Used............................................................................145

Bargaining and Haggling..................................................................148

Business—Purchase.........................................................................152

Business—Sale...............................................................................157

Cohabitation Agreement...................................................................161

Collecting Money.............................................................................164

Contractors....................................................................................168

Contracts.......................................................................................174

Crisis, Public Relations.....................................................................177

Cruises..........................................................................................180

Debt..............................................................................................185

Divorce..........................................................................................189

Employees.....................................................................................192

Family and Friends...........................................................................195

Franchisors....................................................................................198

House—Purchase.............................................................................205

House—Sale....................................................................................211

Insurance Claims, Auto.....................................................................214

Insurance Claims, Homeowner.......................................................... 219

IRS...............................................................................................225

Jewelry..........................................................................................231

Job Interviews................................................................................ 235

Lawyer, Hiring a...............................................................................239

Litigation, Settling...........................................................................244

Loan..............................................................................................247

Office Lease...................................................................................253

Prenuptial Agreement......................................................................259

Real Estate—Listing Broker...............................................................263

Reservations and Tickets..................................................................265

Salary, Beginning........................................................................... 267

Salary, Increases in.........................................................................270

Store Front Lease............................................................................274

Coming Full Circle..................................................................................279

Index...................................................................................................281

About the Author...................................................................................288

13

Introduction

So You Want to Tilt the Playing Field

Some will say that this book is a primer on how to be manipulative.More importantly, others will say this is a book about how not to be

manipulated.The fancy footwork and magic moves for outgunning, outmaneuvering,

and outnegotiating the other person are all here. So are techniques for devel-oping life skills that will dramatically enhance your chances of professional suc-cess and personal satisfaction.

Life is highly competitive. More than ever, the name of the game is results.Authors, whether they be academicians or pin-stripe guerrillas, have re-

sponded in kind:There are hard-bargain books. But life is difficult and demanding enough

without having to spend your days browbeating or bulldozing someone else toget the results you want.

There are soft-touch books. But if you focus primarily on cooperation, youmay be exploited in the process.

A one-dimensional approach just doesn’t cut it in today’s superchargedbusiness environment.

Today’s super negotiator is a problem-solver who seeks hard-bargain results whileusing a soft touch.

Part I, Soft Touch: Finessing, Influencing, and Persuading Others, is about gettingthings to go your way more easily more often. This part is not about being a

How to Win Any Negotiation14

“softie.” It is about how to read people, how to influence their decisions, andhow to deal with their resistance while winning their cooperation and support.It is about finesse, the art of the velvet glove.

Part II, Trouble Shooting: Settling for More, is about what works—and whatdoesn’t—when you are up against a stone wall...or when your ideas are beingrejected...or when you are confronted with hostility and anger. It will teach youhow to be an uncompromising compromiser. How to finesse people whowould rather be right than reasonable and stand up to people you can’t stand.

Part III, Hard Bargain: Winning When the Score Is Kept In Dollars, explores theart and psychology of the rough and tumble—terms, price, conditions. Here isthe iron fist for those times when you need to become a “take no prisoners”opportunist.

Part IV, The Deal-Maker’s Playbook: Low-Impact, High-Yield Tips, Tricks, andTactics. It’s not enough to know how to negotiate; you must also know what tonegotiate. So here it is. Real world deal-making without chiseling, offending, orembarrassing anyone—including yourself. You’ll find step-by-step “how-tos” and“what-tos” for 36 common negotiating situations—everything from buying a carto leasing an apartment. From finessing an increase in salary to influencing theoutcome of a contested divorce. From going toe-to-toe with the IRS—or aninsurance claims adjuster, or someone who owes you money—to how to ace ajob interview, buy a franchise, or negotiate your way out of debt.

This book is a compendium of possibilities.Many of the possibilities have been drawn from recent advances in the

fields of psychology, linguistics, trial advocacy, sales, and management commu-nications. They represent the cutting edge of the art of performance.

There are also possibilities of my own—the result of 40 years in the trenchesas a lawyer representing thousands of clients, both big (foreign governmentagencies and megacorporations) and small, famous (some of the world’s best-known actors, authors, and athletes) and infamous, negotiating deals on every-thing from amphitheaters to Zero aircraft.

And then there are the tricks, the possibilities I picked up from studying theworld’s master deal-makers—the street and bazaar merchants of Bombay, Cairo,Istanbul, and Shanghai.

All are possibilities, because the same problem may call for different an-swers at different times, depending on who or what is involved. Human be-havior can’t be reduced to recipe cards. There is no one-size-fits-all approach.

Possibilities are collectively referred to as “persuasive principles” or “negoti-ating principles.” Many could just as easily have been labeled “leadership prin-ciples” or “conflict management principles,” because they affect behavior. Thesame concepts that will give you a competitive advantage in business can beused to help you get along better with your family, friends, and neighbors.

The choice is yours. It’s all here—everything you need to know to be animpresario of influence or just one hell of a better negotiator.

P A R T I

Soft Touch

Finessing, Influencing, and Persuading Others

17

C H A P T E R 1

Winning Is a Mindset

The Great Wallenda Effect

Being at the top of your game begins with seeding your psyche.

Being a winner is not what you do but what you are. By being, you willbecome.

A loser will dwell on failure. A winner will visualize attainment. By internal-izing success, you develop a winning mindset. With a winning mindset, you willact and react with a winning reflex.

A winner knows that having a victim’s mentality is self-defeating behavior.It will portend rejection or victimization. The self-assured person expects tosucceed—and does.

Sound trite? No question about it. Nor is there any question that winningis a head game. For superior results, you have to expect and get the best fromyourself.

Karl Wallenda, the greatest of the Great Wallendas, was the finest high-wireaerialist of all time. Failure was beyond Karl Wallenda’s contemplation. He spokeof failure for the first time only weeks before plummeting to his death from aslender cable suspended between two resort hotels. The dramatic correlationbetween one’s confidence and one’s performance is now referred to by psy-chologists as the “Wallenda effect.”


There are people who can instruct you how to build your body, train adog, or close more deals. They can give you pointers on how to be moreeffective in what you do. But to be a winner you have to think and believe thatyou are a winner, and what goes on in your head is a do-it-yourself project.

Winning begins with your inner self.

Meet LANCER

The secrets of how to influence others—the persuasion

progression—are contained in the acronym L-A-N-C-E-R.

Linkage

Alignment

Needs

Control

Evaluation

Reading

19

C H A P T E R 2

Linkage

The Stealth Factor

Shaping tone and mood, personalizing, establishing rapport,

developing a positive aura, and creating involvement—all of these

create linkage: a critical personal interfacing that makes it possible

for you to lead and persuade.

To have the style of a super negotiator, there are six secrets you absolutelymust know about.

1. Engage in Cerebral Foreplay

In years past, I looked to the Far East. Principles that Lao-tse preached tohis followers in China’s Valley of the Han 300 years before the birth of Christwere used to explain the concept of linkage. Fortune-cookie wisdom rein-forced this theme: “A man whose face is without a smile should never open ashop,” and “He who goes softly goes far.”

Taking a more contemporary approach, I now call on the teachings of amodern sage—sex expert Dr. Ruth Westheimer.

Doctor Ruth views the mind as an erogenous zone: “The only real aphro-disiac is the one between your ears.” Great lovers know that how it is done is asimportant as what is done.

Cerebral foreplay is an integral part of the persuasion process. It is the soft-touch shaping of how the other person feels about you. People will react to the

L A N C E R


way you act. Good feelings yield good deals. Agreements are made not just onthe basis of reason and facts but on whether the deal feels right.

Negotiate Friendly. Your approach should be first as a person, then as anegotiator. View the other person as a challenge, an opponent, rather than anadversarial enemy.

As our fax/e-mail/cellular telephone world becomes more uniformly high-tech, a soft touch will make the competitive difference. Treating the other side toa $12 lunch today may be a more persuasive tactic than making a $12,000concession tomorrow.

Here’s an example from a moment of business crisis and tragedy.It was the tender side of the “Delta Plan.” “A state-of-the-art blueprint...to

follow in the aftermath of a disaster,” reported the Wall Street Journal.“Within hours of a Texas jet crash in which 137 people died, Delta had dis-

patched employees to be with every victim’s family.” Delta’s strategy was to treat“the victims and their families with all the compassion a corporation can muster.”

The result?“Later, many victims found it difficult to sue a friend. This early bonding...was

part of Delta’s claims-control strategy. And it has been extraordinarily effective.”

2. Hit the Ground Walking

Underwhelm Your Opponent. More often than not, you will want todemonstrate that a low-key style is the order of the day. Relaxed people will beless resistant to you and your ideas.

Practice tip: People who are sitting down are more easily persuaded thanpeople who are standing up.

Lighten Up. The people you want to influence will be defensive or recep-tive, depending on how they read you. Schmooze for a while about the weather,the traffic, Sunday’s ball game, the trivia question you missed last night, somemutual acquaintance. Accept or offer a cup of coffee. Tell a joke. Icebreakersshape a persuasive climate.

3. Personalize the Process

Have you noticed that negotiations conducted over a shorter period oftime are always more competitive? They are. The reason? The negotiators areless able to humanize the other side through personalization techniques.

Personalizing means speaking for yourself rather than your company. Whichis more persuasive? “Karen, I would like to tell you about a deal I can make foryou,” or “Acme has a proposal that it would like to make to Apex.”

Professional communicators personalize constantly. Television news team mem-bers call each other by their first names more than we mere mortals do. Theirhighly personalized dialogue—“Fine reporting, Mary Ann.” “What has happened insports today, Ted?” “Is it going to rain tomorrow, Pete?”—gives viewers a sense of

Linkage 21

ease and commitment. All news shows are pretty much the same in format andcontent. We tend to choose our team by how we feel about its players.

The personalizing strategy works in reverse, too. T. Reynolds, an IRS agent,had maneuvered one of my clients into a full-court press. Our conversationshad always been cordial, but with a standoffish “Mr. Mayer”/”Mr. Reynolds”sort of way. When I finally had occasion to send him a letter of agreement, Iasked his first name. “Just address the letter to T. Reynolds,” he replied, InternalRevenue agents use only a first-name initial on business cards and correspon-dence. When they speak, it is for “the Department” or “the Service” rather thanfor themselves. Similarly, in most jurisdictions, police officers do not have theirfirst names on their ID tags.

Their strategy is depersonalization. The more detached the officers or agents,the less likely they are to be guided by their emotions and the more likely theyare to do their job “by the book.”

4. Establish Rapport

Trust and credibility are essential ingredients of the persuasion progression.Without these ingredients, negotiating would be nothing more than discussion,because commitment would always be in doubt. No wonder it is common tohear businesspeople talk of needing a high comfort level with the folks on theother side.

Trust and credibility are established through reputation and expertise, butmost often through rapport. The other person is more likely to be persuaded ifhe or she likes you.

People will like you if you are sincerely interested in them and their prob-lems. The fellow with problems at the office will give those problems a higherpriority than a famine in Somalia, a volcanic eruption in Colombia, or an earth-quake in Japan. Why? Because those problems at the office are his problems.

Give other people a sense of genuine self-importance and they cannothelp but like you. Talk to people about themselves and what they are inter-ested in and they will listen for hours, and you will be liked for having pickedsuch interesting subject matter.

Don’t overdo. Putting on your negotiating personality doesn’t mean mak-ing the other person your new best friend. It means not allowing that person tobe a stranger.

Never, never be a “junk bonding” phony.Tactical rapport is understanding that your problems and needs are usually

both boring and of little consequence to the other person, their own problemsand needs, however, are of paramount importance. As Mel Brooks puts it,“Tragedy is if I get a hangnail. Comedy is if you slip on a banana peel and die.”

Sorry. When it comes to establishing rapport, only your mother really caresabout how wonderful your new minivan is—or how much you enjoyed theauthentic luau you went to in Kona—or how exhausted you are from all thoseholiday parties.


5. Create a Positive Aura

Persuasion is a function of attitude. Positive attitudes produce positive re-sults; negative attitudes produce hostility.

A positive attitude will be reflected in your approach. Your voice, demeanor,and attentiveness should communicate concern, empathy, understanding, anda desire to work side-by-side rather than toe-to-toe.

Before you can control a situation, you have to be able to control yourself.Sure, it’s tough to be positive when your opponent is a sour, cantankerousdeal-crippler. Sure, it would be self-satisfying to tell an irascible and abusive assto take his proposal and shove it up his briefcase. But is losing the deal a luxuryyou can afford? Is being negative going to maximize your chance of success?

In personal relationships, occasional outbursts of aggression or an unkindword will penalize you a few strokes. They are not terminal. The relationshipcan be patched up at another time and the game resumed.

In a business relationship, the penalty is the game. You do not have theluxury of being able to react rather than act.

Be true to your commitments. Pay attention to the little things; throughthem, other people read you. If you are not punctual in keeping appointments,are remiss about returning phone calls, or don’t send the letter you promisedwould be in tonight’s mail, you are transmitting a negative message that youcannot be relied on to carry out your end of a bargain.

6. Create Involvement

A Shirt Story. Macy’s is Macy’s. Neiman Marcus is something altogetherdifferent. Macy’s hangs most of its sport shirts on racks. Neiman Marcus, true toits upscale image, displays its shirts in fingerprint-free glass showcases.

I confess. On a number of occasions I have purchased a Neiman Marcusshirt even though I knew it really wasn’t right for me. I did so because I waseither too embarrassed or too cowardly to let down the saleslady who was sonice about refolding and repinning the five other shirts that didn’t fit. I knewshe was being paid for her exemplary effort but somehow, because of herinvolvement, I felt compelled to buy at least one shirt even though it wasn’t a GQperfect fit. To buy nothing would have been a rejection of a very nice personrather than a rejection of Neiman Marcus inventory.

A Shaggy Dog Story. We wanted to buy a family dog. The cheapest partof owning a dog is the purchase price. I decided that if I was going to go throughweeks of training and years of expense, I might as well get a best friend withsome status. And so I was off to buy a soft-coated wheaten terrier.

I telephoned the local wheaten guru and was told that, “if approved,” Iwould be number 33 on an “adoption” list that several Los Angeles breedersdrew from as litters were born. I could expect a call in about seven months.

Linkage 23

“Seven months!!”Being status dogs, wheatens are not available for viewing in mall pet shops,

which are reserved for spaniels, collies, labs, poodles, and other species of lesserstatus. So, a week later, I again telephoned the guru and explained that my kidshad never seen a wheaten. Could I show them her dogs so that they couldshare my anticipation and excitement?

On Sunday afternoon, the family descended on her. We admired her house.We admired her kids. Most of all, we admired her dogs. I had a bouquet offlowers delivered afterward to thank her for being so kind.

A week later I got the call: A wheaten puppy was available.Time flies but it isn’t supercharged. Congratulations were in order! I was

now number one!Why?Because I was no longer a statistic. I was a real, honest-to-goodness person

who had taken the quantum leap from being “number 33” to being “Bob.” Myrelationship had changed through tactical involvement.

There you have it: the pitfalls of modern-day shirt shopping and a shaggydog story to boot. All to demonstrate how critical it is to get the other personinvolved with you and your situation. To not allow yourself to be a situation inthe abstract. To create interaction by asking for the other person’s advice, help,assistance, suggestions, opinions, or anything else that causes them to becomeinvolved in the scenario being played out.

Linkage: People want to do business with people they like and

with whom they feel comfortable. Linkage strategies are

designed to humanize negotiations, bolster credibility, create

a negotiating consent zone, and make the other person more

receptive to you and your ideas.

L A N C E R

25

C H A P T E R 3

Alignment

Soar Points

L A N C E R

Being persuasive does not mean standing up to another person

nor does it mean countering with a force of your own. It means

moving with and using the other person’s energy. It means aligning

yourself with—rather than resisting—that energy.

Once a crucial personal interface has been established, take advantage of itand build on it with the soar points in this chapter. Soar points are alignment tricksthat are neither resistive nor combative but which advance the persuasion pro-gression by reinforcing linkage, preventing resistance, harnessing the otherperson’s energy, and shaping a pattern of agreement.

Here are 24 soar points that will make a major difference in your effective-ness in dealing with people.

Reinforcing Linkage

1. Don’t complain or sulk. You are unfair and unreasonable, you are notdependable, and similar utterances are guaranteed to curdle eventhe sweetest deal.

2. Don’t look back. People look back only to criticize. Your goal is anagreement, not an admission or apology. If you talk about who didwhat to whom, you are sabotaging any chance of an understanding.

3. Avoid absolutes like always and never. They beg for rebuttal. Rarelywill anyone always or never do a given thing.


4. Is there a major negative drawback in what you want to propose?You may have a professional, legal, or moral duty to mention it.Besides, even a morocco-bound, gilt-edged, hand-tooled obliga-tion lacks commitment if it has been unwillingly created.

5. Pointing out selected negatives in what you have to suggest stimu-lates confidence and increases rapport. Without being told, every-one knows that next year’s model will be an improved version,that styles are not a constant, and that the discounter on the otherside of town charges less. But a clothier who tells you that the suityou are trying on will never fit properly no matter how much thetailor alters it will earn your confidence for life.

Preventing Resistance

6. Emphasize the aspects of your proposal that the other personseems to like. By stressing spheres of compatibility, you will en-counter less resistance to your ideas and less likelihood that con-flict will dominate the negotiations.

7. A radio advertiser claims that they can give you the “verbal ad-vantage” in dealing with people because a “powerful vocabularygives a powerful impression.” But when rapport is important, talk-ing down to the other side doesn’t work. Nor does pontificating.Nor does having a holier-than-thou attitude. Nor does demon-strating what you perceive as your intellectual superiority. Whatdoes work is speaking to the level of the person you wish toinfluence.

8. Create hypothetical experiences. Suppose we were to...or Let’sassume...hypothetical experiences cause involvement, and involve-ment is the persuasive forerunner to change.

9. Act in a self-assured manner. Don’t be defensive and don’t apolo-gize for your requests. Statements like I really don’t like asking youto do this but...forecast and prompt a negative response. Projectingweakness encourages the other side to become more forcefuland domineering.

10. Avoid judging another person’s actions or thoughts. Judgmentalwords—wrong, stupid, bad, crazy, foolhardy, or ill-informed—promotedefensiveness and resistance.

Harnessing the Other Person’s Energy

11. Let the other person know that their feelings and thoughts are asimportant as yours. Go a step further and sincerely solicit theircounsel and input, making the other person part of a collectivenonadversarial effort. Give incoming suggestions the status and dig-nity of a viable alternative; never summarily reject them. Maybethey can be improved on, to emerge as real possibilities.

Alignment 27

12. Build on the other person’s words using their vocabulary. Maketheir thoughts and words the bridges to meaningful negotiations.A pro will cross these bridges. An amateur will burn them, put-ting up walls in their place.

13. Suggest scrutiny of your ideas. Allow them to be tested by fairand logical examination. What do you think of this idea? Do you seeanything wrong with this possibility? Ask how your suggestions canbe altered to be more compatible. Acknowledge that you under-stand a critical comment, but do not take the criticism personally,no matter how pointed it may be.

14. Don’t maneuver the other person into a corner by pointing outdiscrepancies and showing them to be a liar. To do so is an invita-tion to fight. Instead, go to the pros’ script: You’ve said X and you’vesaid Y. They are at odds with each other. How can we resolve theseinconsistencies?

Shaping a Pattern of Agreement

15. Be persuasive one on one. Trying to persuade more than oneperson at a time only brings additional egos, roles, and needs intothe game.

16. An approach that moves from agreement to agreement will pro-duce better results than an approach that moves from conflict toagreement.

17. If you cannot agree on specific major issues, then seek an agree-ment in principle that can be a bridge to further discussion.

18. Express your positions as feelings. Expressed feelings are irrefut-able. A statement that Your price is not fair is attack-provoking. Itrejects the seller’s notion of worth. I don’t feel the price is fair,instead of asserting a position, relates feelings that the price is un-fair. How can anyone find fault with feelings? If I tell you I feelhappy, you cannot tell me I am wrong. If I tell you I feel sad, youcannot correct me. If I feel that your price is not fair, how can youtell me that those are not my feelings?

19. When you must take a poke at a problem, offset it with a pat onthe back. Sandwiching, a tactic of praise followed by criticismfollowed by praise, is so commonly used as a technique that mostpeople will feel manipulated by its use. Starting with criticism fol-lowed by praise reinforces linkage by making the other personfeel you are part of the same team. People liking the pats will doeverything possible to eliminate the pokes.

20. Avoid hype that only builds false hope. Be conservative in yourprojections. Surpass those conservative projections, and you be-come a star. Fall short of an optimistic forecast and you will becalled unreliable on a good day and defendant on a bad one.


21. General praise (“Good presentation, Jan”) comes across as an ex-pression of good manners. Specific praise (“Jan, I was particularlyimpressed with the way your presentation compared…”) reinforceslinkage because it sounds less manipulative and more believable.

22. Asking, “What is your problem?” weakens linkage by making theother person feel inadequate or lacking.

23. It is rare that someone will admit that they were being unreason-able. Asking, “Why can’t you be reasonable?” is a question whichwill weaken linkage and invite conflict.

24. A linkage rule of thumb: If saying it will make you feel good, thendon’t say it unless it will make the other person also feel good.

Alignment: To capture an elephant in the web of a spider, you

must use the energy of the elephant. In the persuasion

progression, alignment techniques play against and harness the

other person’s energy while establishing a pattern of agreement.

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C H A P T E R 4

Needs

Making Your Ideas Irresistible

L A N C E R

It is only after I have read, identified, and stimulated your needs

that I will be able to energize our discussions while irresistibly

presenting my ideas to you.

Think about the choices you make:• Is your car the cheapest automobile that you could find?• Is your blue sweater the least expensive blue sweater sold in

the mall?• Do you get your haircuts only at shop that offers the best deal?

Your answers are no because price is only one factor in how we makechoices.

Although it was disguised as a cable television program, it was really one ofthose half-hour long infomercials for a self-improvement DVD. Viewers woulddramatically increase their persuasive abilities by calling the toll-free number andordering the secrets of how to push the other person’s “motivator buttons.”

Motivator buttons???If you ever took Anatomy 1-A or peeked when you were in the shower,

you know that none of God’s children has these features. What then are wetalking about?


Other people’s needs are their motivator buttons.The attributes of your proposal that best satisfy other people’s needs—your

proposal’s sweet spots—are the “push.”Advertising agencies are in the motivator button–pushing business. They

get paid to tell us how their clients’ products or services will satisfy our needs.Masters of manipulation are expert at pushing motivator buttons, knowing thatwhen we are satisfying our needs we are guided by our emotions rather thanour reason.

Although not all people behave the same way in the same situation, certainmotivator buttons are common to us all. Here are two of the most important.

1. A Sense of Goal Attainment

For years, Cadillac marketing reminded us that “You know you have arrivedwhen you arrive in a Cadillac.” Cadillac wanted its cars to be perceived not just asmere status, but the Lifetime Achievement Award you present to yourself.

A developer’s marketing plan is aimed at “high-wealth individuals.” Thepitch: spending up to $10 million for a second home in the Bahamas “is acelebration of accomplishment.”

The need for a sense of goal attainment is the need for self-actualization: tobe able to accomplish the big things we set out to do in life and the smallerthings we set out to do in negotiations.

2. A Sense of Self-Esteem

Imagine that you are part of a consumer panel and are looking at watches.Here are two candidates for your consideration:

• Watch A is enclosed in a lightweight, slim, waterproof resin case.This quartz watch has state-of-the-art accuracy, a stopwatch, analarm, a lighted display, and a calendar. You can purchase thiswatch for $35.

• Watch B is enclosed in a heavy, stainless steel, waterproof case.This watch tells the date and the time. Because it is a self-windingmechanical timepiece, it is less accurate than watch A. You canpurchase this watch for $3,395.

Which watch would you select?As you have probably already guessed, watch A is picked from any number of

popular and inexpensive watches that are available just about everywhere.Watch B is a Rolex Oyster Perpetual Datejust.If you are buying an accurate timepiece, then objectively watch A is the

appropriate choice, hands down. A Rolex is handcrafted and takes months tocreate, but, according to a leading Rodeo Drive jeweler, the movement is“obsolete—it’s not quartz. There is a fluctuation of two to three minutes a month—if you are lucky. But it’s the watch.”

Needs 31

Style? The Rolex has a number of worthy, less-expensive imitators.Investment? Stainless steel is not a precious metal, and a watch is not really an

investment. (It depreciates in value and pays no dividends or interest.)Comfort? Other watches are stressing that it’s in to be thin, but a Rolex is so

bulky that custom shirtmakers know to leave an extra half-inch of fabric in theRolex owner’s left cuff.

Look at the Rolex advertising. What does it tell you? Rolex doesn’t pro-claim itself a status symbol. Instead, it tells you that Rolex watches are worn bythe well-known. By the bold. By the adventurous and athletic people withwhom we would all like to identify. Our self-esteem is enhanced through iden-tification and emulation.

If a Rolex were just a timepiece, it would have gone the way of the sliderule—another example of obsolete technology.

Our sense of how we appear to others is status. How we appear to our-selves is self-esteem. A Rolex buyer’s need is not the need to own a timepiece.It is the need to own a “feeling better about yourself” piece.

The need for a sense of self-esteem is the need for a feeling of competencyand personal worth, a need for status, a need to be recognized and appreciated.

Party Time

You are a caterer and have been negotiating a contract for a large corporation’sannual dinner party. The price and menu have both been modified severaltimes. Yesterday, the customer told you, “There is fierce competition for thejob and you must improve your price.”

Should you:• Continue to negotiate?• Hold firm?• Request verification of the competition’s prices?• Try some other tack?

The best answer: find out what your customer likes about your companyand your proposal. These are your client’s motivator buttons—the needs thatyou are able to satisfy better than your competition.

The chances are that the reliability of your company, or the appearanceand demeanor of your white-gloved food-service personnel, or your incred-ible hot hors d’oeuvres will be much more important than a modest pricedifferential. Besides, if you allow price to be the sole basis of persuasion, themost persuasive caterer in town will always be the one with the lowest price.

Winning the contract depends on understanding why this customer has cho-sen to negotiate with you, bypassing all those other caterers in the yellow pages.

Another situation: You own a small lodge in Montana and are expecting atelephone call from a movie production company asking you to quote your


“best price” for providing accommodations for a cast and crew for several monthswhile they are on location.

Would you be best advised to:• Quote high?• Quote low?• Quote in between?• Quote nothing at all?

Your best bet would be to quote nothing at all. Even though you may notneed additional information, tell your caller that you want to get much moreinformation regarding your prospective guests’ specific needs.

By understanding the production company’s needs—its motivator buttons—rather than its requests, you will be in a position to persuade rather than just bid.

Needs: In the quest to satisfy our needs, we are guided by

emotion rather than reason. This quest for satisfaction energizes

the persuasive process. The art of influence is the art of

stimulating, reading, and then satisfying other people’s

conscious or unconscious urges for feelings of goal attainment

and self-esteem.

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C H A P T E R 5

Control

How to Listen So People Will Talk

and Talk So People Will Listen

L A N C E R

There is a quantum difference between the power of speech and

the power of persuasion. Speaking is about giving out information.

Persuasion is about getting through. It is about control. It is about

engineering consent.

The persuasion progression is advanced not by monopolizing a conversa-tion but by controlling it. How and where you make your shot will predeter-mine how it’s returned by the other player.

Actions control reactions.When and how a suggestion is made or a question is asked will determine

the other person’s response.

Persuasive Listening

As a persuasive listener, you reaffirm and galvanize alignment by becomingthe speaker’s advocate and adding something new and positive to the speaker’sargument.

Handing the speaker ammunition will cause him to look at you not as anenemy but as a collaborator in a common mission. You can never be faulted fortrying to understand the speaker’s position, and you will be credited for help-ing to improve it.


Speaker: Hey, I am so jammed up I can’t even guess when your order willbe finished.

Listener: I understand that you are backlogged and cannot commit to acompletion date. With the Labor Day weekend coming up, you will beeven further behind schedule.

By bringing up the Labor Day holiday, you have purposefully strengthenedthe speaker’s case. Rather than resisting, you have aligned yourself with thespeaker through agreement. Later, with rapport established, you will be in abetter tactical position to point out the failures, weaknesses, and problems asso-ciated with the speaker’s position.

Persuasive listening is occasionally, but infrequently interrupting to let the speakerknow you are tracking the conversation. Limit these unobtrusive interruptions toinquiries that clarify what is being said or briefly acknowledge that what is beingsaid is understood, although not necessarily agreed to.

Persuasive listening is helping the speaker clarify his or her ideas by repeating backor paraphrasing from the speaker’s perspective what has been said. (I think I under-stand what you are saying, but I want to make sure I know what you mean....)

Persuasive listening is knowing that there is a difference between listening andconcerned listening.

A television interviewer’s guest, a well-known celeb hairdresser, was dis-cussing why women tell their most intimate secrets to their hairdressers. Womenopen up and reveal all because their hairdressers show special concern—achieved,he explained, by making the customers more beautiful as they speak.

A prominent UCLA professor of medicine counsels his students to showspecial concern by sitting at the head of the patient’s bed and touching themwhile listening. By standing, or sitting at the foot of the bed, the physician ap-pears less concerned and more positioned to exit than to hear.

Persuasive listening is listening out loud. It is active listening. A pro, whether aphysician or a hairdresser knows that there must also be a showing of specialconcern, an indication that you want to connect because you care about theother person’s point of view and feelings.

Talking out loud is a habit. Listening out loud is an art.

Questions That Guide and Direct

Conversations are controlled by the listener through the use of questions.Notice the course changes in the following conversation between a show

production manager and her costume maker, which I overheard in Las Vegas.While using the costume maker’s energy, the manager skillfully guided anddirected the dialogue through the use of questions that brought her focus andher ideas into the conversation.

Manager: Do I understand you correctly when you say the costumes can’tbe ready by the 15th because you don’t have orange taffeta and because yourseamstresses are fully scheduled?

Control 35

The manager’s question focused the dialogue on a single issue—the avail-ability of taffeta and seamstresses.

Manager: Are you in effect telling me that if I can get orange taffeta deliveredto you by Monday and if your seamstresses work overtime, the costumes can beready by the 15th?

The second question directs the costume maker toward the manager’ssolution: The manager will make sure the taffeta is at the costumer’s workshopby Monday, and the seamstresses will work overtime.

The Power of Suggestion

Whether you are a know-it-all or, even worse, a tell-it-all, it’s a mistake toalways be right.

Hidden suggestions are not communicated as suggestions. Instead, the otherperson “discovers” an idea in your hidden suggestion and proposes it back toyou with an unjustified pride of authorship. At a minimum, hidden suggestionspreserve linkage and alignment by keeping you from sounding like the personwho has an answer for everything:

• I don’t know what I would do if I were you. I had a customer with asimilar situation a few years back and he.... (The customer’s solutionis the hidden suggestion you are offering.)

• I read an article the other day and the author thought it would makesense if.... (The author’s thought is the hidden suggestion.)

• Some people think that the wisest thing to do in this market is to.... (Theother person should then suggest to you the solution that yousaid other people are using.)

Being able to introduce a good new idea into a conversation is an art.

Channeling

The dessert cart was docking at the table where I was having dinner withbusiness associates.

Our waiter, an exponent of the “life is to be lived” school of indulgence,described in teasing detail the mousses, cremes, and pastries. My real dilemmahad to do with Doc Gitnick. For years he has been reminding me that the bestdessert is a nice piece of broiled fish. Having a skinny physician can sometimesbe a curse.

Not being a group to walk away from temptation, we happily indulgedwhile speculating about what a life it would be if cholesterol and caffeine wereessential nutrients.

But wait a minute. Just as the check arrived, we noticed the same waiterbringing fresh boysenberry tarts to another table. Asked why we were neveroffered the tarts, he replied, “We had so few left, that we saved them for those


patrons who specifically requested them.” The regulars knew to ask. We didnot. The waiter’s channeling stratagem was to communicate a limited menu.

Presenting your proposal in a limited-menu fashion will direct the otherperson’s thinking to your presented choices rather than to other possible alter-natives: It seems to me that there are really only three choices....

I Heard You Twice the First Time

It’s a matter of simple economics: Talk is cheap because the supply is fargreater than the demand.

The less you say, the more people will remember. The more concisely youare able to communicate your thoughts, the greater the likelihood you will beable to get a yes. If your proposal will take a great deal of time and effort tounderstand, its chances of being turned down for all the wrong reasons aregreatly enhanced.

To simply express an idea or situation is power. Persuasion is not aboutwhat you tell the other person—it’s about what the other person hears.

THE MESSAGE IS…YOU!

Think back: Was it a fund-raiser, a political candidate, or a membershipdrive spokesperson—the “when will this be over?” speaker—who left you boredand edgy? The speaker who never ventured away from the lectern. The speakerwho glanced back and forth between pre-prepared remarks and the audience.The wooden speaker who spoke in a dry, lifeless monotone.

Imagine: That same speaker is making the same remarks while movingaround the room, interacting, and linking with the audience. The speaker is intouch through eye contact, facial expressions, and vocal intonation.

Now ask yourself: Which of the two presentations would motivate or moveyou? Persuade you? Convey commitment, belief, and enthusiasm? Reflect cred-ibility and sincerity? Demonstrate warmth?

Whether your audience is many listeners or only one, a well-crafted argu-ment or proposal is not enough.

Content is what is in the eyes (and ears) of the beholder. Content is a totalitymade up of word signals (the text of your remarks) and body signals (yourdemeanor, gestures, pitch and tone of voice, rate of speech, and energy).

Body signals will have a far greater impact on the listener than word signals.Words impact the listener’s intellect. Body signals impact the listener’s emotionsbecause they reveal not only your doubts, fears, and deceptions, but, moreimportantly, the kind of person you are. In the persuasion progression, you areboth the messenger and the message.

Practice tip: Your eyes are the magnets that will cause the listener to connectand stay connected with you.

Control 37

Prioritization Tactics

Which part of your negotiation pitch will be best remembered: the begin-ning, the middle, or the ending?

People remember only what is simple and meaningful—and pushes theirmotivator buttons. Listeners remember the first and last parts of a presentationbetter than the middle. The first part is remembered better than the last. Gamecontrol requires prioritizing your presentation accordingly.

An Oscar for Best Original Screenplay went to John Patrick Shanley for themovie classic Moonstruck. Here is one of its many memorable moments:

Priest: What sins have you to confess?

Loretta (Cher): Twice I took the name of the Lord in vain, once I slept withthe brother of my fiancé, and once I bounced a check at the liquor storebut that was really an accident.

Priest: What was that second thing you said, Loretta?

Please Return Your Mouth to Its Full Upright Position

When do you stop talking?You stop when you have finally asked the other person for a commitment

on the major issues.Do not repeat yourself.Do not resell.Do not rephrase.You will have an urge to talk—It is easier to manage sound than silence.We mistakenly believe that the more we say, the more we influence. But

probably nothing you can say will improve the silence. By anxiously sweeten-ing your proposal before there is a response, you are only bidding againstyourself.

Control: The persuasion progression is advanced by having a

winning mindset; establishing linkage; aligning yourself with

the other person’s energy; pushing motivator buttons;

controlling dialogue by guiding the other person to your

thoughts through questions and suggestions; controlling yourself

by presenting your ideas in a clear, succinct manner; and

knowing when to stop.

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C H A P T E R 6

Evaluation

Finders Keepers, Losers Beepers

L A N C E R

Your medium or mode of communication is in and of itself a

negotiating tactic.

It’s a new age. Telephones are in airplanes, cars, and shirt pockets. Faxes arehousehold appliances. E-mail is a part of our daily lives. Each communicationsmedium comes with its own built-in implicit message.

Want your proposal to deliver this implicit message: This is it. Take it or leaveit? Then writing may best serve your purpose.

If feedback is more important than the implicit finality of writing, then aninteractive medium—a meeting or phone call—will be your medium of choice.Initiating a live conversation conveys a Let’s talk about it message. Investing theeffort of arranging and holding a meeting sends a stronger message that there isa desire to talk things out.

“If the Phone Doesn’t Ring, It’s Me”

(Title of a song recorded by Jimmy Buffett.)

When you place a call, you have a major advantage: Knowing you will beon the telephone, you are psyched up and prepared to negotiate.


But a phone call may, on balance, be to your disadvantage. You can’t readbody language through a telephone receiver, and it is easier to be fooled ormisled when your full sensory abilities can’t be used.

Ask yourself: Is there a possibility that your phone call will more readilyprompt a negative response? Because the other person is looking at plastic anda telephone cord instead of flesh and blood, it is far easier to say no telephoni-cally than in person.

Your call also makes it all too easy for the other person to verbally walk outof the conversation: “I was just running out the door to a meeting when youcalled....”, “Sorry, but I can’t talk any more right now, I have an incoming callfrom London....”

Ask yourself: Is it important to explore needs and interests in a lengthy,more fluid dialogue? It takes much more patience and effort to be a goodtelephone listener. Does what I have to say require a high degree of concentra-tion that may be too difficult in a telephone call?

Ask yourself: Will I be able to resist the pressure to respond, which is inherentin a telephone call? A few moments of silence in a meeting is a few moments ofsilence. On the telephone, a few moments of silence is an eternity.

Ask yourself: Will a more personalized strategy better advance my cause?Will a telephone conversation be more stressful or less? Telephone conversa-tions are briefer and therefore more competitive than face-to-face dialogues.Meetings take time and effort to arrange and attend, but by their nature, theyare chattier and less structured.

Ask yourself: Will the person I am calling be curt because I have interruptedwhat he or she is doing?

I Just Called to Say.…

Once you have decided to go it by telephone, make sure you have thoughtout what you will say and how the other person can be expected to respond.Insulate yourself from diversions and distractions. Telephone calls are prone toshortcuts, so make sure you have all the necessary data and information infront of you.

I Am in Receipt of Your Proposal, I’ll Waste No Time Reading It

I handed my client the rather wordy and complex contract I had received.As he perused it, he glanced up and said, “Bob, the trouble with Hong Kong isI can never seem to find Chinatown.”

In every fat proposal, there is a thin proposal trying to get out.A persuasive proposal is one that sets forth your best ideas rather than all of

your ideas.Today’s executives are learning how to avoid read it and sleep letters and

written proposals. They are learning that the best way to make sure that awritten proposal is summarily rejected is to leave nothing out.

Evaluation 41

They are learning that emphasis is on simple letters containing short sen-tences and paragraphs.

They are learning that technobabble or any part of a presentation not servinga clear purpose belongs on the cutting room floor.

Evaluation: Expediency, convenience, and effectiveness are not

the same. The right tactic may be to initiate a call, or it may be

to postpone accepting a caller’s invitation to talk. And then it

may be to e-mail or fax a letter. Or call a meeting. Or snail-mail

a letter.

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C H A P T E R 7

Reading

People Are an Open Book

L A N C E R

The art of winning begins by reading yourself. It is advanced by

knowing how to read others. To persuade you, it is not enough to

know who you are. I must also know what you are.

An accomplished people reader knows that there are two eternal truths.

Eternal Truth No. 1: The Other Person Is Not You

Each of us has our own reality. No one functions in the abstract, and weview things as we are rather than as they are.

Your every word, your every gesture, your every movement passes throughthe other person’s filters. These filters include personal values, impressions, back-grounds, prejudices, likes, dislikes, experiences, feelings, and expectations.

Do you hear what I hear? Because no two people have the same filters,thoughts transmitted may not be the same as thoughts perceived. This truth isthe spawning ground of much tragedy and almost all comedy. (“Help the OldLadies’ Home.” “Blimey, I didn’t know they were still out.”—Me and My Girl, a1937 musical.)

Perceived differences, which are people differences rather than substantivedifferences, are the barrier between one person’s thoughts and another’s. Topersuade and influence others, you must come to grips with a problem as theyperceive it. You must deal with their reality.


The art of reading people begins with understanding that the other personis not you, will never be you, and cannot be read as if they were you.

Eternal Truth No. 2: People Conclude Facts From Their Gut

Impressions, Perceptions, and Assumptions

As kids, we found that the comics were a good way to learn how to read.Even if we didn’t understand all of the words, we could track the story lineonce we knew the signs. Villains were the ones who always seemed to be inneed of a shave, smoked stubby cigars, and wore dark clothing even in thedead of summer. Heroes, on the other hand, were a clean-cut, wrinkle-free lot,with straight noses and the proper attire for every occasion.

As adults, we still allow symbolism to define the other person. We assumecharacter traits from initial impressions.

But impressions are only temporary. They are assumptions based on cluesof bearing, speech, dress, demeanor, and grooming. You may later discover thatthe persona projected was a facade and that the clues you were reading werefalse leads.

The “ol country boy” may be a Wharton M.B.A. trying to make you theexpert, hoping you will grant concessions, or make suggestions contrary toyour own best interests.

Include Him Out

My friend Don is a brilliant lawyer. He is the man other lawyers call onwhen they have a thorny legal problem. He is the man always nominated firstto head up an academic bar committee.

But alas, Don can bore you to tears if given half a chance. At his best, he is10 thumbs and a trick knee—the Sheik of Geek. Don is an unpressed collage ofcolors, patterns, and seasons. In a brown sweater, he closely resembles a mudslide. He is the personification of the short-sleeved, wash-and-wear dress shirt,the polyester suit, and the unbuttoned button-down collar.

Don’s blond desk is so old that any day it will change from outdated tofashionable Art Deco. Half the plants in his office are dying. The other half areplastic. Don is central casting’s notion of couch-potato plain and Norman Rockwellplacid.

Then there is Howard, who I have known for years. By his own admission,Howard is one of the world’s worst lawyers. He brought up the bottom of hisclass at a fourth-rate night school. Howard is unrealistic about life, himself, andhis cases. The fact that he graduated and passed the bar exam after only threetries is still one of life’s great mysteries.

Howard is debonair, athletic, authoritative, and well-groomed. He may evenhold a black belt in savoir faire. Howard is pure pow! The colored Jockey NextTo Nothing Poco brief and the three-piece pinstripe were designed with Howard

Reading 45

in mind. His car, a black Bimmer, shines like obsidian. Howard has a leap-tall-buildings persona. If Don and Howard were attending the same dinner party,Don would bag scraps for his dog and Howard would bag three new clients.

Although we do not judge books by their covers, we do judge people byour first impressions of them. Those first impressions are our assumptions oftheir ways.

Don gives a first impression that he is lackadaisical, disorganized, passive,and inefficient. Howard projects reliability, credibility, efficiency, trustworthi-ness, and authority.

The art of reading people is the art of looking beyond the apparent andbeyond the assumed. The art of knowing how people are read is also the art ofbeing “well-read” by others—of influencing how you are read by them.

Reading people is about developing insight that goes beyond the obvious.Not everyone has a sixth sense. But if I cannot read you, how will I know

how to persuade you? How will I know how hard to bargain with you?Will a simple agreement suffice, or do I need a lengthy contract filled with

onerous compliance and enforcement provisions?Can I rely on you to adequately and promptly satisfy my critical requirements?

Would I be better off not even getting involved with you in the first place?To forecast and manage the behavior of the people you wish to influence,

you must first read their way….

Reading the Roles People Play

A physician’s bedside manner, a salesperson’s charisma, a spouse’s atten-tiveness, a parent’s supportiveness, a police officer’s authority, an entertainer’sflamboyance, a mâitre d’s graciousness, a teacher’s restraint, an executive’s deci-siveness, and a sergeant’s bravado are, to a large degree, role playing.

As role players, we deliver those qualities and characteristics that we expectfrom ourselves, and others expect of us. How we see ourselves is often areflection of how we believe others see us.

By our nature, we tend to play to our audiences. Agents act more likeagents when their principals are present. Young lawyers drop their voice anoctave when conferring with clients. Texans who never ride horses wear cow-boy boots when they go to conventions in Los Angeles.

People conform to the roles they play. They are what they do. Roles leadto predictable responses, actions, and reactions—they are part of our way.

Reading Personality Traits

As he walked along the path, the boy spotted a struggling scorpion lying onits back.

“Please turn me over, or I will surely die,” begged the scorpion.“If I do, you will sting me. Then I will be the one to die,” the boy replied.


“No. No. I could never sting someone who saved my life,” pleaded thescorpion.

As the boy turned the scorpion over, he was stung.“Why did you do that? You promised!” the boy sobbed.“You knew what I was when you picked me up,” replied the scorpion as

he ran beneath a rock.An uncaring person with a history of overreaching and taking advantage of

others isn’t going to turn over a new leaf come dawn.A person who is stingy and penurious today will not be a big-time spender

tomorrow.The impatient person who screams at your receptionist for being put on

hold, or who flies off the handle at a busboy who forgets to bring his coffee, isnot going to be any more tolerant or understanding of you once the contract issigned.

We are creatures of habit, and our readable habits are stronger than oursense of reason. They are a constant facet of our way.

Reading Hidden Word Messages

Only the foolish man hears all that he hears.—Ancient proverbThe other person’s messages can be real, true, and reliable, or they can be

lures, cover-ups, and decoys.A teenage girl tearfully tells her boyfriend, “It doesn’t matter.” Are we to

believe that it really doesn’t matter, or that it matters a lot?“Incidentally,” “by the way,” and “as you already know” sound casual and

incidental, but usually introduce statements that the other person wants todownplay or sneak by.

A friend tells you, “You are 100 percent correct in what you are saying,but....” Does that friend really feel you are 100 percent right, or are you justbeing softened up for some bad news?

“I’ll give it my best.” “I will try my hardest.” These statements are clues thatthe speaker is presupposing a high probability of failure.

A world-class people reader sees and hears more than the other person’swords, and more than the message that the other person is intending to con-vey. Construing words literally, or accepting the other person’s messages at facevalue, is not effective people reading.

Reading for Priorities

Quick! Make a short list—say, five items—of foods, vacation spots, or televi-sion shows.

Did you list the items randomly? Or in the order of your personal prefer-ences? In all probability, the person with whom you are negotiating will present

Reading 47

or specify issues in an order that is consistent with his or her own priorities ordesires.

Points that you may consider throwaway points, or of secondary impor-tance, may be primary points to the other person. Learning to look and listen forwhat the other person considers critical will enable you to discover motivatorbuttons, or to grant or request concessions accordingly.

The Wishful Listening Trap

On Black Monday, the stock market had its second worst crash in history. Thenext day, the media featured scores of financial prophets and prognosticators.

Those who had just gotten clobbered (hearing only what they wanted tohear), were quoting the pundits who were now predicting that the ferociousbear market would be short-lived and that good times were around the corner.

Those who had sold before the crash reinforced the wisdom of their deci-sion by quoting what they had wanted to hear: post crash forecasts of impend-ing disaster, and advice that the best survival strategy was to be half in cash andhalf in canned goods.

Each group of investors only listened to what they wanted and needed tohear. When we listen selectively, we are not really listening at all.

Reading: To be able to persuasively present your ideas and

prevent resistance, you must read how the other person makes

decisions. How they make sense of things. It may not be the

same as how you make sense of things. Each of us is

preprogrammed to act and react in accordance with the roles

we play, our personality traits, our core tendencies, and our

needs.

Amateurs will listen to someone else talk only because they

know their turn is next. World-class negotiators will listen to

someone else talk to gather “fine print” clues that can be used

to influence and persuade.

L A N C E R

49

C H A P T E R 8

LANCER

Postcards From the Top

The soft-touch, low-impact methodology of the persuasion

progression takes you over the top. The secret of your success is

readily recalled in the “breaking through” acronym, LANCER.

Linkage is a personal interfacing that encourages the other person to be re-ceptive to you and to your ideas. Shape your negotiating environment—tone,mood, and attitude—through rapport, personalization, and involvement.

Alignment tactics harness the other person’s energy while establishing a pat-tern of agreement.

Needs must be identified and stimulated. Pushing motivator buttons willenergize discussions while making your ideas irresistible.

Control the negotiating dialogue through persuasive listening and questions.With linkage, alignment, and control firmly in place, present your proposal in asuccinct, prioritized manner.

Evaluation of communication options enables you to determine which mediawill best advance the persuasion progression.

Reading the other person is ascertaining how roles, personality traits, andcore tendencies will impact decision-making.


LANCER: A Step-by-Step Progression?

The persuasion progression cannot be segmented. It has neither discernibletiers nor distinguishable boundaries. Masters of persuasion are weavers. The re-sult is a tapestry that blends, bonds, and relies on each and all of the contributingelements. Read the other person while establishing linkage. Align while evaluat-ing communication options. Control dialogue while identifying needs.

It’s Not Over Even When It’s a Done Deal

After you have gotten a nod of acceptance, don’t validate the wisdom ofthe other person’s decision by making reinforcing comments (That was a wisechoice or You got an incredible deal). It will only make the decision suspect.

If you have gotten the nod on primary issues but there are still unresolvedminor points, sometimes—and this is always a judgment call—it may make senseto leave those micro-negotiating points for another day.

Letting the deal set gives the other person a chance to become comfortablewith it, or to act in reliance on it by planning a vacation or raising the cash to dobusiness with you. Confront the minor issues too early, and you risk theirbecoming deal breakers.

The persuasion progression isn’t about dumping everything on the negoti-ating table at once. Each new point raised is an excuse for the other person togo back and revisit terms previously agreed on.

Practice tip: Sometimes it makes good sense to nail down what you have soskillfully achieved in a letter agreement, or by getting signatures on a dealmemo before forging onward to conquer new micro-point territory. Withimportant points solidly “in the bag,” you have tactically positioned yourselfto press for those lesser terms without risking the ground you have won.

A cautionary note: You can never really be sure when it’s over. One of myclients owned one of the country’s biggest automobile dealerships. On the otherside of the negotiations was a major Japanese bank that took special pride in its image.

I had negotiated the reduction of my client’s personal guarantee obligationto the bank from about $11 million to $1.5 million. A nice two days’ work. Myclient and the bankers willingly signed a letter of agreement.

Less than two weeks later, a bank senior vice president who had signed thedeal announced, “No matter what it costs, the bank is going to worm out of thedeal.” Somehow my client had managed to snatch defeat from the jaws of victory.

Word had gotten back the bank that my client was bragging to the world abouthow he had outgunned, outmaneuvered, and outfoxed the image-conscious bank.

Let everyone close with as good a feeling as possible. A good

winner doesn’t dance in the streets or shout from the rooftops.

Hard bargains will be more readily acceded to if they include a

face-saving exit strategy.

L A N C E R

P A R T II

Trouble Shooting

Settling for More

53

C H A P T E R 9

Finessing Hostility,

Aggression, and Anger

Dancing in the Minefield

People who are hostile, argumentative, or angry are unreachable.

Standing up to irrational people is the norm. Finessing people who

insist on being right rather than reasonable is the art.

When You Are Under Attack

An attacker sets forth a position full throttle.The in-your-face approach is intended to run both you and your ideas into

the ground. You’re on the ropes and sliding. An agreement must be reached:You don’t have the luxury of walking away. On the other hand, you can’t dealwith someone who won’t let up until he hears the blood.

Although it’s all talk, the other person is attacking with more than a bigmouth. Their muscular, glandular, and nervous systems have all been sum-moned into the foray. Spot an ungentlemanly or unladylike gesture and youcan add skeletal system to the list.

Telling the other person to “calm down” implies they have no reason to beupset. Their response will be to justify and defend their reaction to you.

Start converting the attacker into a pussycat early. It is much harder todeescalate an attack after you have launched an attack of your own: Personali-ties have come into play. Emotions are reaching their flash point. Positions arebecoming more polarized. Ideas are crystallizing from having been vigorouslydefended.


Persuading someone who is angry or hostile is like driving a car:you must come to a full stop before you can shift into reverse. Only when theother person has regained some composure and has reestablished equilibriumis it time to move in with your own strategy.

Operation: Containment

Here are four steps to bring an in-your-face attack to a screeching halt.

Step 1. Choose one of the following statements and deliver it firmly and calmlyto your attacker:

You may be right in what you are saying.

This may be statement is nonthreatening. It will not precipitate any addi-tional emotional outburst.

You are probably right.

If you are reasonably sure the attacker’s statement is correct, then say so.

If I were in your shoes, I think I would feel the same way.

This is a nonprovoking response to use if there is no possibility that theattacker may be right. It is a confirmation that the attacker’s message has beenunderstood and appreciated. Reinforce this statement by demonstrating thatyou understand why the opposing position has been taken. After all, if youwere the mirror image—the exact alter ego—of the attacker, wouldn’t you haveto feel the same way? Don’t confuse confirming that you understand what isbeing said with agreeing with what has been said.

Step 2. Do NOT attack the other person or the opposing positions.

Step 3. Do NOT defend yourself or your stated concerns and needs.

Step 4. Keep the dialogue going.

Mouth-to-mouth combat can’t continue with someone who is saying thewords that every arguer longs to hear: You may be right.

❍ ❍ ❍ ❍❍ ❍ ❍ ❍❍ ❍ ❍ ❍❍ ❍ ❍ ❍❍ ❍ ❍ ❍

When emotions come into play, smart people do dumb things.

Dumb Thing No. 1: They Forget You Can Lead a Horse to

Water but You Can’t Make It Do the Backstroke

Get Real!

Count up the times you’ve heard someone say, “Oh, you are so right, yousilver-tongued devil; I am now going to see things your way!”

Put on Your “Sensible Shoes”

You may be able to outfox the other side with fancy footwork and quicksil-ver moves, but are you going to get what you want? No testimonial dinner is

Finessing Aggression, Hostility, and Anger 55

held and no record book, plaque, or trophy is awarded for excellence in debatingor for getting in the last word. You are a winner only if you achieve your goal.

Turn negotiating dialogue into a confrontation or trial and you will lose.Even if your logic prevails, your prize will be a bitter, get-even opponent. Andthat is if you “win.”

The Ego Has Landed

A group of us were dining at a small French café. Only our friend, Ron, waspraising the Gerberesque pureed parsnips and insisting that the Barbie-size por-tion of veal was ample. At first I was surprised. To me, Ron is the personificationof a hearty appetite. But Ron was behaving out of character for good reason.He had chosen the restaurant. Ron is no different from you and me, andnothing is as sacred as one’s own judgment.

Arguments send a message: The other person’s judgment is not as good asyours.

People resist change because they are committed to the status quo...ORbecause in their mind there is a justification that supports their position...ORbecause they are attached to what is comfortable and familiar...OR because, likeRon, their “good judgment” is on the line.

As issues become more complex and outcomes less predictable, we tend tobecome simplistic, relying on gut instincts and premonitions. It is always easier totake a stand than to understand. So, too, it is easier to decide against than to decidefor.

The persuasion progression is not about showing you are right. People dothings for their own reasons, not for yours. The persuasion progression is abouthelping people see why it makes sense for them to do things your way.

Put someone on the defensive end of an argument, and they often end upsaying only those things they can say well.

Put someone on the defensive end of an argument, and there is a goodchance they may withhold information or distort the information they chooseto give.

Put someone on the defensive end of an argument, and they willovergeneralize your differences: “you always....” or “you only....”

Put someone on the defensive end of an argument, and they will changefrom being stubbornly right to being adamantly righteous.

Put someone on the defensive end of an argument, and their most com-pelling thought will be to reciprocate all over you.

Dumb Thing No. 2: They Won’t Admit Their Mistakes

“Professional investors generally agree on one bit of advice: Cut your lossesand let your winnings run,” reported the Wall Street Journal. However, mostpeople will keep the stocks that are losers. “They don’t want to tell themselvesthat they made a mistake.”


Your opinions and ideas are not undeniable truths to chisel in granite andpass down from generation unto generation. Better to ‘fess up than to haveyour feet held to the fire and be proven wrong. An apology is a credibilitybooster. The impression you leave by not forthrightly dealing with a mistakecan have a greater negative effect than the mistake itself.

Dumb Thing No. 3: Instead of Zeroing in on How Something

Is to Be Done, They Focus on Why It Wasn’t Done That Way

Before

Delivery trucks servicing neighboring businesses frequently block your drive-way and cause your customers a great deal of inconvenience. This situation hasbeen discussed with the owners of the businesses several times before.

When you next meet with your neighbors, do you:• Ask why trucks continue to park in front of your driveway?• Threaten to call your wife’s cousin, Bubba, who owns a tow

truck?• Threaten to block their driveways in retaliation?• Suggest solutions?

The first three choices will only make your neighbors angrier and morehostile.

Fix the problem, not the blame. Suggesting possible solutions is an issue-management technique that moves the focus of discussions from having to jus-tify your complaint to the proposed remedy. If you leave the resolution toyour neighbors, they will give a higher priority to their own needs than toyours.

Standing up to emotional responses—anger, argument,

irrational tirades—is not getting through to the other person.

It is only “being impossible back.” Advancing the persuasion

progression is not about a show of one-upmanship or a contest

of wills, It is about winning.

57

C H A P T E R 10

Overcoming Rejection

Riding the Crest of a Slump

Rejection is a negative response. But a response by definition means

the lines of communication are open. Rejection is managed by

tactically presenting problems, using surgical-strike questioning,

reframing your ideas, understanding how and when to use threats,

and showing the other person how to retreat while saving face.

Hanging in Tough No. 1:

Break Sore Spots Into Component Parts

Deal with conflicts one bit at a time. Break big problems into smaller prob-lems that can be reckoned with individually.

Separate monetary and nonmonetary segments, and discuss the nonmon-etary first.


A Problem Well-Stated Is a Problem Half-Solved

You have just moved into a neighborhood. The folks a few doors downown a large Doberman, Spike, who for years has been allowed to roam free.

Your kids have no place to play after school except on the sidewalk in frontof your home. Although Spike is known and loved by the neighborhood, hisvery presence terrorizes your children, who refuse to go outdoors. Your chil-dren are just not ready to make friends with Spike. Calling Animal Regulationwould make you the neighborhood villain.


You have no choice other than to visit Spike’s owners.

Before you read any further, take a minute to jot down what you plan to say afteryou have introduced yourself.

Which of the following dialogues sounds most like what you wrote down?A. We have a problem. After school, you should keep Spike locked

in the yard or on a leash. [Explanation follows.]B. We have a problem. Our children have no place to play. [Expla-

nation follows.] Therefore, after school, you should keep Spikelocked in the yard or on a leash.

If dialogue B sounds like what you wrote down, then give yourself a pat onthe back. Your proposed solution (Spike must be confined) was disclosed onlyafter the logic leading to that solution had been presented. The neighbor had tolisten to your explanation in order to ascertain your request.

I can’t always help it. When someone tells me a joke, as often as not I listenwith only half an ear. My thought processes are too busy searching out andthen mentally rehearsing a joke that I can share in return. In the same way, weall instinctively prepare mental counterarguments while the other person isverbalizing his or her thoughts.

In dialogue A, your logic was lost. Because you asserted your proposedsolution before its supporting logic, your neighbor probably never heard thelogic. Spike’s owner was too busy preparing a rebuttal to the proposed solu-tion. That’s the nature of us humans.

Instead of leading with your proposed solution, use a one-two-three com-bination punch: (1) lead with the facts, (2) deliver your logic, and (3) followthrough with your proposed solution.

Hanging in Tough No. 3: Surgical Strikes

There is nothing uglier than reason when it is not on your side.Without being a negaholic, pursue new territory by asking questions that

strike at the basis, principle, and logic behind the other person’s position. Whetheryou already know the answers to those questions is not important.

People who feel they are being influenced or manipulated can’t be influ-enced or manipulated. Statements lead to defensive retorts, but questions willcause the other person to reexamine and justify an announced position. Onlyquestions will separate reasons that only sound good, from good, sound rea-sons. If a position is not realistic, the other person will soon discover its flaws.


How to Be an Uncompromising Compromiser

Rejection does not exist in the abstract. By definition, rejection is reactive.Remove what is causing the other person to reject your idea and you haveeliminated the problem.

Overcoming Rejection 59

The way something is framed is the difference between whether a glass ishalf empty or half full.

Two automobile manufacturers, one American and one Russian, agreed toa two-car race. The U.S. entry won hands down. A Russian news agency reframedthe results: “In an international car race held yesterday, the Russian car came insecond and the American entry came in next to last.”

A rejected point or proposal can be presented again and again so long as itappears fresh and new enough for reconsideration.

Pick a Deal, Any Deal

Lower the price of the house you are selling and, to offset the price reduc-tion, increase the simple interest rate on the note you are taking back. Reducethe price of the house if you are allowed to lease the house back rent-free for sixmonths after title has changed hands. Lower your price, provided that the buyerdoesn’t demand certain repairs be made as a condition of sale.

Hanging in Tough No. 5: How and When to Use a Threat

When Marsha told our office manager that she was quitting unless she gota 20 percent raise, the showdown tactic left her looking at the career opportu-nity ads.

Here are five showdown NEVER EVERs:1. NEVER EVER lead with a threat. An ultimatum is a knockout

punch to be used only after some initial rapport has been estab-lished. Threats are last, not first, resorts.

2. NEVER EVER make a threat without first casting it as a warning,preferably a soft-touch warning. More about this below.

3. NEVER EVER make a threat you don’t want to carry out. Don’tthreaten to quit your job or fire a valued employee if that is thelast thing you would ever want to do.

4. NEVER EVER use a big threat in furtherance of a small gain. Tellyour teenage daughter that if she comes home past her curfew “shewill never go out on Saturday night again,” and you will only lookridiculous. A threat has to be relative to its purpose and objective.

5. NEVER EVER make a threat that is inconsistent with the attitudeyou previously displayed. A threat requires perfect timing andshould appear as a natural and logical extension of demonstratedanger, thwarted expectations, or an unresolvable deadlock.

Soft-Touch Warning

A soft-touch warning does not pull the dragon’s tail because it is low-key,humanized, and nonconfrontational. It is a warning cast as the presentation of amutual problem. Consider the following examples:


It was all still very hush-hush. The president of an NBA team had em-bezzled team funds. The stolen money was long gone, and the president hadno apparent ability to make restitution. My Mission Impossible was to negotiatea face-saving exit, keep the president out of prison, and avoid any commitmentfor repayment that the president couldn’t comfortably honor.

The tactic put into play was the unexpected: a soft-touch warning to theclub owners.

The owners were warned that if the president was sent to prison, the teamwould receive nothing. And obligating the president to restore all of the stolenfunds would only encourage him to leave the country or hide future earnings.

Once a mutual problem is on the table, there is an opportunity to proposeits solution. What would make sense, I explained, was for the president tomake partial restitution by paying the team a “comfortable” percentage of hisincome for a negotiated period of time. That was the deal we settled on.

A winning mindset is a belief that stumbling blocks are overcome throughpersistence, a positive attitude, continuing interpersonal linkage, and mainte-nance of a resourceful, sincere, friendly, low-key negotiating climate so neitheryou nor your ideas are avoided.

Marketplace bargaining is an event. Negotiating is a process.

What is not happening for you now may happen for you later.

61

C H A P T E R 11

Running Through Walls

The Trying Game

A stone-wall mentality is much more difficult to manage than

rejection. When you are stonewalled, the other person is refusing

to have a meaningful dialogue—the lines of communication are

shut down. If you pound on the wall with more of what wasn’t

working for you to begin with, you will only provoke more

resistance. Don’t smash down walls when you should be looking

for a door.

Don’t Give Up

I have been accused of beating dead horses by prolonging discussions thatshowed no vital signs. But because I have seen a lot of very experienced nego-tiators give up too easily and too soon, I keep going—not brashly or abrasively,but subtly and unobtrusively.

Real effort is needed to jump-start a stale and weary dialogue. Even creativenagging is still nagging. Unless you keep forging on, you will have to considerdiscussions terminated. Without forging on, how will you discover motivatorbuttons or strengthen rapport? Negotiations haven’t failed until—short of sta-pling the other person’s coat sleeve to your desk—you have quit trying.

How to Unlock Sealed Lips and Closed Minds

If you ask questions that begin with can, can’t, is, or isn’t, chances are youwill get a single-word response.

Single-word answers do not supply insight into the other person’s desires,perceptions, and needs. They do not reveal reasons for resistance. Instead,they are positions that the person becomes emotionally committed to defend.


To make that rock talk, you need probing questions designed to flesh out theconcerns and motivator buttons of people who are otherwise unwilling toopen up. Design your questions so that they cannot be answered with a shakeof the head or a single word such as yes, no, or never.

Practice imperative: To ensure that you neither prompt an argument norappear confrontational, probing questions should be asked in a sincere, un-hurried, soft-touch manner. Probing questions are the keys to revitalizingdialogue. You have five keys to choose from.

Key No. 1: Questions That Aren’t Questions

Partially paraphrased “questions” are not questions at all. Information is elic-ited by paraphrasing the speaker.

Things are crazy down here and I won’t be able to fill your order on Friday.You won’t be able to fill my order on Friday? (Paraphrased response.)Well, we have this important job that takes priority.Another job takes priority? (Paraphrased response.)Your materials are in but there is a bonus if we get this other job out early. (Apreviously hidden agenda is revealed.)

To find out what had happened to the order, the listener partially para-phrased what the speaker had already said. This soft-touch technique is a favor-ite with psychiatrists. They know people will open up more readily when askedparaphrased questions that use their own words.

Practice tip: Try this technique in a social setting when it’s hard to make smalltalk.

Key No. 2: “What” Not “Why”

Why elicits a general “because” response. What produces a more specificresponse that better reveals true needs and interests.

Why questions are intimidating and are usually associated with situationswhere we must be defensive:

That is my final decision.Why?Because I said so, that’s why.

By contrast, what questions elicit fresh information on which new solutionsmay be based:

That is my final decision.What are the reasons it is your final decision?The reasons are….I can’t really afford to buy it now.Under what circumstances would you be able to afford it?

Running Through Walls 63

I can’t do it now but maybe in a few weeks….In what way will things be different in a few weeks?

Key No. 3: “What If?”

What if questions pose soft-touch hypothetical possibilities. They are notoffers to be accepted or rejected; they are questions to be answered. What ifquestions stimulate conversations while supplying new information and insightinto the other person’s interests and goals:

What if I were willing to wait until February to buy a new minivan from you?I notice you have four green minivans but only one blue one. What if I were to buya green minivan from you instead of the blue one?

Key No. 4: Statement Questions

Too many probing questions can make even the friendliest dialogue start tosound like an inquisition, prompting a Hey, I am not on the witness stand response.

Statement questions are probing questions disguised as statements. Withsome luck, the right lighting, and a little makeup, they will not be recognized forwhat they really are.

I was wondering what you thought of my proposal. (Question: What did youthink of the proposal?)Although this makes a lot of sense to me, it may not seem like a good idea to you.(Question: What do you think of this idea?)

Key No. 5: What Will It Take to Convince You?

“What will it take to convince you that now is the time to move [or, ours is theright company to do your job; or, my offer is both competitive and fair]?” is agood news/bad news question.

• The good news: The phrasing avoids prolonged questioning andsecond-guessing by eliciting a direct and unequivocal response.

• The bad news: The other person is encouraged to take a position.Because you may not like the answer this question evokes, itshould be used only as a last-ditch or tight-move play.

For Every Problem, There Is Already a Solution—

Whether You Know It or Not

Knowledge is important. But without imagination, knowledge has nowhereto go.

Dare to be creative! Novel and inventive approaches get people to change.The greater your creativity level, the more alternatives, suggestions, solutions,and proposals you will be able to contribute to the persuasive process.


Each creative idea is a stepping-stone toward another creative idea. If youcan overcome each new reason for resistance with a solution to overcome thatresistance, then you have the flexibility and staying power necessary for findinga basis for agreement.

The response may be rejection. But even rejection is progress because itmeans you have discarded an unworkable alternative. Rejection is a positivevital sign that the lines of communication are open and alive. Withdrawal andresistance—the stonewall—are always more difficult to deal with than rejectionbecause the lines of communication have slammed shut.

In addition to your own brain, use all the brains you can borrow. For adviceand counsel, look to others who have backgrounds different from your own.Friends and neighbors are ideal candidates. Borrow the thoughts of lawyers,accountants, and bankers who have broad experiential backgrounds.

Managing Expectations

Frequently, a stone wall’s foundation will be a negative expectation. Manag-ing the other person’s real or erroneous negative expectations is a vital part ofthe persuasion progression. Expectation management meant my saying what ahealth-club landlord needed to hear before negotiating a lease renewal: “I knowmy client has not been the best of tenants. However, he now has new manage-ment and the capital necessary to operate efficiently and to pay rent timely.”

Change to a Negotiator-Friendly Resistance Pattern

Each negotiating level has its own unique needs and roles.Each level also has people who have their own personal needs for achieve-

ment, self-worth, and security; their different individual roles to play out; andtheir different constituencies to court.

When Thomas Watson, Jr., was IBM’s chairman, he called a meeting of histop executives to remedy what he considered to be a pressing problem. Acomplaint had been received from an employee who had found just the rightlevel for airing his grievance. He had written to Watson’s mother.

Turning to different levels of authority—the store manager instead of the storeclerk, the store owner instead of the store manager—will expose different levelinterests and different people interests and, therefore, different patterns of resistance.

An employer deadlocked with a local union might appeal to the rank-and-filemembership in newspaper ads, hoping that the members themselves will pressurethe local’s management into adopting a pattern of resistance more consistent withthe membership’s needs than with the needs of the local’s management.

At the top, you will always find the greatest flexibility. The top has the risktakers...the policy makers...the people who are so secure in their positions thatthey understand the exceptions as well as the rules.

At the bottom, you will find those who dare not deviate from establishedprocedure. A Chicago bus driver made the national news by refusing to brieflyleave his route to drive a passenger suffering a heart attack to a nearby hospital.

Running Through Walls 65

…And if You Still Haven’t Gotten the Nod

Looking good when things aren’t going your way takes a lot of style.Monday mourning? If a result is not totally to your liking, instead of crying

over spilled milk, be content it wasn’t Jack Daniels. Your style will be remem-bered long after your disappointment is forgotten.

Finessing a stonewaller begins by “hanging in” and by knowing how to getthe other person to talk and to keep talking. It is further advanced by reshapingof stonewaller’s negative expectations and suggesting new creative alternatives.

67

C H A P T E R 12

Finessing Worth, Value, and

Share Differences

Waging Peace

Many differences are quantitative worth, value, or share differences.

Sometimes, they are best dealt with by negotiating an approach

rather than a position.

Separated at Worth

A common mistake made by negotiators at all levels of experience is thatthey become committed to stated positions and allow these positions to be-come announced points of honor.

Positions elicit counterpositions. When defending positions becomes a mat-ter of ego, personalities are wrongfully summoned into play. Positional bargain-ing without a strong fall-back option is a risky game.

Positional bargaining can be avoided by negotiating an approach rather thana dollar amount. One approach could be the use of external criteria.

The Abos Marine Blue Book contains the retail and wholesale value of boats.Kelley’s Blue Book contains the value of cars. However, an external criteriondoes not necessarily have to be a published reference. Consultants are calledon to settle executive salary disputes. Appraisals are often the external crite-ria used to resolve conflicts involving everything from antiques to businessgoodwill.


Mr. Superstar, an American heartthrob whose face is often on the cover ofPeople magazine, had fallen in love with a lakeside retreat—an older fixer-upperwith a $3 million price tag. He was willing to pay whatever was truly fair, but inhis mind the home’s $3 million price tag was about $700,000 off the mark.Representing Mr. Superstar, we started negotiations.

“I do not haggle and $3 million is my price,” was the seller’s preoffer proc-lamation. The seller’s justification for the oversized ticket was in large part thehome’s history. The house was built and had been occupied by a real-estatetycoon for whom a fair-sized California city is named—a fact that Mr. Superstardid not believe justified the price demanded. We wanted to talk dollars. Theseller wanted to talk about throwing in towels and linens bearing the priorowner’s monogram.

The M word (money) had to be sidestepped if we were to avoid a posi-tional tug-of-war.

Our readily accepted solution was to negotiate an externalization approachrather than dollars. We suggested that a mutually agreeable appraiser set theprice. If the appraised value was $3 million or less, Mr. Superstar was obligatedto purchase. If it was $2 million or more, the seller was obligated to sell.

Randomizing, such as flipping a coin or drawing lots, is a simple externalizationtechnique that I have seen used even by sophisticated businesspeople whentraditional analytical approaches have failed.

At other times, a formula solution will mean the difference between resolv-ing a dispute and going to the mats. You will need an arsenal of surefire, fast-acting deadlock busters. The six deadlock-busting formulamatic tactics that followcan be used in a variety of situations.

Deadlock Buster No. 1

I had negotiated the sale of the late best-selling author Harold Robbins’shilltop mansion to a famous producer. However, during the pendency of thesale, a $1 million price reduction was suggested because the geological integrityof part of the grounds was put in issue. The parties’ experts disagreed as to theseriousness of the problem. One thing was certain: Robbins wanted to sell andthe producer wanted to buy. What could be done to resolve this conflict?

An approach was suggested: The two disagreeing geologists would them-selves choose a third geologist. The conclusion of this third geologist would bedeemed controlling.


To decorate their Turtle Creek mansion, clients “T” and “R” acquired fourfine oil paintings of slightly varying value. Later, they decided to call it quits.What would be the best way to divide this art, realizing that each painting had aspecial value beyond its extrinsic worth?

Finessing Worth, Value, and Share Differences 69

It was agreed that one person would get the first and fourth choices ofpaintings, and the other, the second and third choices. If they couldn’t agree onwho would get which set of choices, a flip of the coin would decide.


An actress and her production company employer were deadlocked overan appropriate salary for the fourth season of a very successful soap opera.How could this deadlock be overcome?

Both the actress and the company would write down their final position—how much they would pay or agree to accept. If the two figures were within15 percent of each other, they would be averaged. If they were more than 15percent apart, a neutral party would select the more realistic figure of the twosubmitted. (“Baseball” is the name often given to this deadlock buster.) Thisapproach encourages both sides to be realistic and reasonable in the formula-tion of their final offers.


As an alternative approach to the scenario in No. 3, the neutral party couldwrite down what she or he believed was the fairest and most equitable salary.This figure would not be disclosed to either the actress or her productioncompany, who would then write down their own final positions. The positionclosest to the neutral party’s figure would be the salary for the coming season.(This deadlock buster is often called “golf.”)


“L” and “A” are in the midst of a divorce. Both worked for years building thefamily landscaping business. Each wants to buy the other’s one-half interest inthe business for as little as possible. They agree on only one thing: a strangerwould not pay top dollar for the business. How can they break this impasse?

One spouse (the “deciding spouse”) would decide what would be both afair price and fair payment terms for a one-half interest. The other spousewould then get to choose whether to be the buyer or the seller of that one-halfinterest, using the deciding spouse’s price and terms.

The deciding spouse, not knowing whether he or she would be the buyeror seller, would set parameters that would be realistic and fair to either side. Ifthe role of the deciding spouse can’t be agreed on, then a flip of a coin wouldbe determinative.


Jane owned a champion female Irish Wolfhound. Jane knew little aboutdog breeding, the care of a pregnant bitch, or what to do with a newborn litter.Paul, an experienced breeder and a new acquaintance, owned a championmale. It was agreed that the litter would be shared equally.


The problem standing in the way of true romance was Jane’s concern thatPaul, with his superior expertise, would choose the best puppies for himself,leaving Jane with the less desirable offspring. No one else in the state knew asmuch about Irish Wolfhounds as Paul. How could Jane avoid being at Paul’smercy?

Paul would select two pups at a time. Jane would then select for herselfone of the two pups chosen by Paul. Not knowing which pup Jane wouldselect, with each draw Paul would pick out two pups with the greatest champi-onship potential.

They seem to be everywhere: people who would rather be right

than reasonable. Often, the disagreement with these impossible

people is not so much about money as it is about fairness.

If the other person acknowledges a true interest in making

a deal, then suggest an externalization or formulaic approach.

If that suggestion is refused, then call the game “hardball.”

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C H A P T E R 13

Finessing People Who

Would Rather Be Right

Than Reasonable

Slow Squeezing

The most effective way to deal with such people is through the

steady, patient, unemotional application of all the techniques you’ve

learned in Part II of this book. I call this slow squeezing.

Let me tell you about my worst vacation day ever.My wife and I arrived in Zagreb, in the former Yugoslavia, on a Saturday

night in November. In our room at the Intercontinental Hotel was a brochureextolling the beauty of Plitvice Lakes, 16 small lakes connected by waterfalls ina beautiful mountain setting.

A Sunday visit to Plitvice Lakes sounded wonderful. According to the con-cierge, Plitvice Lakes tour buses did not operate off-season, but public buses ranin each direction on the hour. It was a 2 1/2-hour journey for $2.50—a truebargain. We were concerned about the weather, but the concierge assured usthat the tram that circled the lakes every 45 minutes was enclosed, and that a“visit to the lakes was an absolute must.”

We arrived at the lake at 1 p.m. only to discover that every restaurant andshop was locked until summer. The tram ran only every three hours in the off-season, and the next tram was two hours later. Suddenly, it began raining. I’mnot talking drizzle, I’m talking buckets. With no place to go, we raced back to themain highway to catch the 2 p.m. return bus.


It gets worse.There was no 2 p.m. bus. The 3 p.m. bus and the 4 p.m. bus passed us by.

They were too filled with villagers returning to their jobs in Zagreb after aweekend at home. By 4:30 p.m., we were very concerned, anxious, and wet.

There were no taxis, there were no buses, there were no restaurants.There was coldness, there was rain, there was darkness.Sloshing down the highway, we came across a local man who offered to

drive us back to the hotel for $85. I was too wet and cold to think aboutnegotiating, and I gladly accepted without a whimper.

Before going up to my hotel room, I stopped at the assistant manager’sdesk, feeling some sense of drama as I stood before him soaking wet. Certainlyhe would be sympathetic to the plight of a shivering guest.

I was wrong. He was unprepared to reimburse me the $85 or offer even ahot bowl of soup. He did agree to explain the situation to Mr. Bratas, the man-ager, when he arrived in the morning.

Here’s the next morning’s dialogue between me and Mr. Bratas.

Manager: I have received a memo from the assistant manager explaining indetail what happened. We regret the inconvenience. The hotel, however,does not take any responsibility for what happened.Bob: Mr. Bratas, you may be right in what you are saying.

Acknowledging that Bratas may be right was both a defusing tactic and amodulating device, setting a tone for calm, nonpositional dialogue. It was alsodemonstrative of my having an open mind. Criticizing or yelling would onlyhave caused Bratas to become more defensive.

Addressing Bratas by name, I was both personalizing the negotiations andreminding Bratas that he was an active participant in the problem-resolution pro-cess. I did not want him to sit in silent judgment while I spun my tale of woe.

Bob: Perhaps I am totally wrong in asking the Intercontinental to reimburseme. The hotel brochure in my room encourages visits to Plitvice Lakes.Your concierge told us that it would be a wonderful, relaxing way to spendour Sunday. Am I wrong in believing that the hotel was recommending avisit to the Lakes?Bratas had been invited to be both candid and objective with me. I needed

Bratas to become involved, to evaluate the situation with me as part of a col-laborative, nonadversarial effort. To accomplish this collaborative involvement, Isincerely solicited Bratas’s criticism of both my facts and my analysis of thosefacts. A position-oriented approach was painstakingly avoided.

Wanting Bratas to reciprocate, I was allowing my conclusions to be testedby his sense of what was fair and reasonable.

Finessing People Who Would Rather Be Right... 73

Bob: I appreciate the time that was taken by your staff in explaining how totake the bus to the lakes and back. Their interest and desire to be helpful isnot in question.Staff personalities had been separated from the dispute. By telling Bratas

that his staff tried to be cooperative and helpful, I was setting a hotel patternof conduct and hospitality that I expected him to abide by. If brought into ourdiscussions, the concierge would not consider my attack to be against himpersonally.

Bob: Hopefully you and the Intercontinental will want to be fair with me. Ido not want to appear greedy and I know you too want to resolve thissituation in a manner that is both sensible and fair.Fairness, not money, was my primary stated concern. Bratas could not fault

such an approach. Not wanting to sound self-righteous, I did not say: “Sure, themoney is important, but even more important to me is whether I am beingfairly treated.”

Bob: Perhaps I should really be discussing my feelings with theIntercontinental’s management in the United States. To whom do you rec-ommend that I write? Do you think if my travel agent also wrote that itwould help?This veiled ultimatum reminded Bratas that I was serious about this situa-

tion and that the problem would not end with our discussions. I was not “re-porting” him to management, but I did want to discuss my feelings withmanagement. Bratas was on notice that he would have to continue to deal withthe problem.

Bob: Mr. Bratas, I understand that your position is that you have no obliga-tion to reimburse me the $85 I spent.By acknowledging that I fully comprehended Bratas’s position, I was con-

firming that I understood what he had said without agreeing to what he hadsaid. By not having to reassert his position of nonresponsibility, he would per-haps be less defensive.

The words you and your (rather than hotel) were being used. Even thoughpersonalities were purposely being kept out of the picture, it was still verymuch a person-to-person dilemma.

Bob: I am curious. What is the reason you do not want to reimburse me?My question generously presupposed that Bratas had a rationale for his

stated position. This may or may not have been true, but the approach wouldcompel him to show his cards and produce the logic behind his stated position.

Bob: Let me ask a few questions to make absolutely sure I understand thefacts:


• Is the brochure in every room because the hotel recommends visits toPlitvice Lakes?

• Is it the duty of your concierge to assist guests with local touring?• Should the concierge have dissuaded rather than encouraged us from

going to the Lakes?

These pointed questions were designed to elicit answers that I knew al-ready. The questions prompted Bratas to rethink the fairness and logic behindhis stated position. If Bratas was to change his mind, it would be because ofquestions asked rather than statements made.

Bob: I think I understand what you are saying. The hotel has no responsibil-ity to me because it has no control over whether buses are filled or PlitviceLake facilities are closed. If my understanding is wrong, please tell me.Again, I had confirmed in positive, unsarcastic terms that I understood

what Bratas had told me. He had now been invited to tell me whether myperceptions were wrong—a reminder that I wanted our communications to beopen and clear. More importantly, the logic and rationale behind Bratas’s posi-tion had been identified and contained. This “logic” could now be openly dealtwith by both of us.

Questions rather than statements were posed to Bratas, causing him torespond with answers rather than defensive retorts. Questions also causedBratas to remain an involved participant in the persuasive progression.

Bob: I know that you are trying to be fair with me.By reminding Bratas that fairness was the standard of a mutually agreeable

solution, I wanted him to continue to be worthy of my appreciation of whathe, as a person, was trying to accomplish.

Bob: The suggestion to go to the Lakes was the hotel’s suggestion which wasreinforced by your concierge. The concierge also knew it was off-season, sothe regular tour buses would not be operating again until summer.Do you think it is reasonable for me to expect that he would have knownthat Plitvice Lakes had become a desolate, off-season area?You are right that a concierge has the job to assist hotel guests with theirtravel plans. I agree with you that he probably didn’t know that on Sundayreturning buses would be too full to stop at the Lakes for passengers. What,however, is the reason for the concierge not knowing the status of a hotelrecommended attraction?

I had to deal with a behavioral truth: it is more important for people to beright than to be reasonable. I had reaffirmed that what Bratas had told meearlier was “right.” Bratas was not being cross-examined in front of a judge orjury. He alone would decide whether I would be a winner. If Bratas was goingto change his mind, it would be for his own reasons, not mine. My job was tocause him to generate his own reasons for wanting to change.

Finessing People Who Would Rather Be Right... 75

Using the word what rather than why kept an important question fromhaving an accusatory quality.

Bob: One fair method of resolving this situation would be for the hotel toreimburse us the $85 we spent, less the cost of two return bus trips and thecost of taxi fare from the bus station back to the hotel. Do you think thatmakes sense?A settlement possibility had been presented for Bratas’s evaluation. The

proposed solution was not tendered as being mine or his. Instead, it evolvedfrom our general dialogue without any claim of authorship. If it was rejected, itwas not my proposal being refused, which would make it easier for me to tryother possibilities.

The settlement was proposed only after the reasoning supporting the pro-posal had been communicated.

Bob: If we are able to agree, then you can adjust my hotel bill. If we areunable to reach a satisfactory resolution to this situation, then I would liketo discuss the matter further with whomever you believe to be the appro-priate person in the United States.I had reiterated that a no answer would not be conclusive. Although I

didn’t want to sound threatening, I did want Bratas to know where he stoodwith me. A harsh threat or clear warning, however, would only have destroyedthe tone of objectivity I had created.

Wanting to make a positive answer as easy as possible for Bratas, I hadsuggested crediting my bill rather than writing a check or reimbursing me incash. Adjust is a word associated with fairness and reason.

After Bratas consented to adjust the bill, I suggested it would be both a nicegoodwill gesture and appropriate hospitality if we were guests in the hoteldining room that evening. Bratas agreed, and it is with fondness that I still re-member the cherry strudel.

The art of finesse is influencing and controlling outcomes with

a soft touch, but a firm goal.

P A R T III

Hard Bargain

Winning When the Score Is Kept in Dollars

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C H A P T E R 14

Analytics

Choice Points

The persuasion progression is about bringing the other person

around to see things your way. It is now time to ask: What do you

want to persuade the other person to do? Analytics are the dynamics

you must consider when you determine your negotiating objective.

How hard a bargain will you drive? Will you be opportunistic? Tough?Moderate?

Your answer is not a constant. In each situation, you will need to ask:• What is a winning result?• What is my negotiating goal?

At this point in my seminars and workshops, more hands are raised than atany other time. Invariably, the question asked is: “How can anxiety-provokinghard-bargain tactics be used with soft-touch tactics, which are tender with egos?”

The negotiating game’s most common error lies in a belief that theremust be symmetry between personal conduct and negotiation goals: toughdemands = tough persona; soft demands = kinder, gentler persona.

How you do something and what you do are not the same. Iron fists do fitin velvet gloves.


Doing business with a hard nose is one thing. Doing business with an un-friendly, unlikable hard nose is something else. Stiff terms don’t have to beaccompanied by a stiff persona.

Having a soft-touch negotiating personality and being easy are not the same.Easy or soft-touch/soft-bargain negotiators will lose in a positional hard-bargaininggame. Soft-touch/hard-bargain negotiators will invariably do better than hard-touch/hard-bargain negotiators. Why? Because a nice-guy persona makes not-so-nicedeals go down easier.

Excuse Me for Interrupting Your Reading, but Would

You Be So Kind as to Hand Me Your Watch and Wallet?

After 100 armed robberies of hotel guests, the infamous “Gentleman Ban-dit,” surrendered to Houston police. Some of his victims regretted that he hadgiven himself up. Others from whom he had stolen cash and jewelry couldn’tsay enough nice things about him: “unfailing graciousness,” “really very nice,”“caring,” “apologetic,” “friendly manner.” “He held a gun on me with one handand returned wallet pictures of my grandchildren with the other,” reportedone grateful grandpa, who went on to say, “I liked him.”

The bandit’s demands were not only unconscionable, they were criminal.But he made them with finesse, grace, and a soft-touch style that created noanimosity toward him as a person.

Coopetition?

Those who first came to America bargained tough. Winning was measuredby what they had achieved when the papers were signed, the hands wereshaken, and the dust settled. Negotiated outcomes had clear winners and clearlosers. It made no difference whether they were Asian or European or Latin.They had come from towns and villages where a marketplace mentality wasan inherent part of their cultural and ethnic identity. The doctrine of caveatemptor—let the buyer beware—was very much a part of yesteryear’s less-protective notion of American jurisprudence.

Today, students are learning that winning is not always a matter of getting asmuch as you can for as little as possible. They are learning that the real “otherside” may not be local subcontractors and suppliers but foreign competitorsbent on getting a larger share of their market. Traditional “opponents” such aslabor, materials vendors, and components manufacturers can sometimes beviewed as potential allies.

They are being taught that many situations offer an incentive for bargainingmoderation, as well as an incentive for bombs-away competitiveness.

They are being told that sometimes a moderate stance yields a greater re-turn than hard-bargain competition, and the line between winning and losing isat times too thin to perceive.

Analytics 81

Hard bargaining doesn’t mean closing your mind to the potential benefits ofmoderation in bargaining. Only an unskilled negotiator will summarily reject mutual-gain possibilities without giving them any consideration or thought. That consid-eration, that thought, that flexibility of determination is the mark of a pro.

There will be times to be a flat-out opportunist.There will be times when you will be dealing with customers of long stand-

ing, business associates, family, or key employees, and the importance of therelationship will overshadow the substantive result.

There will be other times when you will be so firm on certain issues thatyou may even refuse to negotiate. Neither Sears salespeople nor the clerks atyour local Blockbuster negotiate, and there is no reason why you have to ei-ther. Some things are just not negotiable, and that is okay.

In many situations, there will be both a strategic motivation to be moderateand a strategic motivation to be exploitive. In those situations, you will findyourself blending tactics to achieve a result that will be to your distinct advan-tage but will ensure a stable and harmonious conclusion.

Have a Game Player’s Mindset

Life is not monochromatic. Negotiating opportunities are not uniform. Thereare no McDeals, so there can be no scripts or formulas to see you through.

The positive-result delivery system of this book is easy to understand andeasy to use, and it will dramatically increase your ability to influence negotiatingoutcomes. Only one barrier stands between its methodology and its applica-tion: your lifetime of habits.

Recognizing a student as someone who had attended my negotiating semi-nar about a year before, I asked why she was again enrolled. “So I will remem-ber to use what I already know,” she replied.

If you discover the good, sound, workable possibilities in this book andthen don’t use them, you might as well not have read this book at all. Byviewing life’s negotiating situations as a game, you will overcome old habits andbetter remember to use what you now “already know.”

With a game player’s mindset, you will view your negotiating opponent asa challenge rather than an enemy or adversary.

As a game player, you will set and revise goals. You will seek perspective.Without perspective, you will see leaves instead of trees, trees instead of forests.

And without perspective you will never see the butterflies—those small,simple, but profoundly important possibilities of the persuasion progression.

Explaining his theory of how a major occurrence could be produced by aminor one, meteorologist Edward Lorenz, discoverer of the butterfly effect, wrotein Newsweek, “If a butterfly flapped its wings in Brazil, it might produce a tornadoin Texas. Unlikely as it seems, the tiny air currents that a butterfly creates travel


across thousands of miles, jostling other breezes as they go and eventually chang-ing the weather.”

As a game player, you will analyze and appreciate relationships and se-quences of events; you will identify your negotiating problems so you cancorrect them next time; you will be less behavioral and more analytical; andyou will develop a defensive awareness to the other side’s use of tactics, be-coming more sensitized to your own tactical and strategic opportunities.

Everyone who has been told to exercise more or to start eating sensiblyknows that it is as hard to get into a good habit as it is to break a bad one.

A book on dancing won’t make you light on your feet, a book on sexwon’t make you a great lover, and a diet book won’t make you thin. To convertthe methodology of this book into a skillful resource takes time, thought, andpractice.

In every instance, you will achieve more and will face less

resistance if your hard bargain is delivered with a soft touch.

Whether your hard-bargain strategy will be overreaching or

moderate, or whether the tactics you choose to implement that

strategy will be rigid or accommodating, will be a function of

your personal style, how you define “winning,” industry custom,

a myriad of external factors, and your own flexibility in being

able to balance all of these along with the critical analytics that

are discussed in the next two chapters: Relationships and Power.

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C H A P T E R 15

Relationships

Walking Between the Raindrops

Relationships are a choice point analytic. They provide insight

through precedence, create special obligations, and bring

dimension to how winning is defined.

So you want to sell your car. You won’t deal the same way with yourfavorite nephew as you will with the guy wearing three gold chains and mockostrich loafers down at the used-car lot.

Because no two relationships are ever quite the same, no two negotiatingsituations will ever be quite the same. In a relationship with a person who, youbelieve, will be extremely demanding, you too will be extreme. In a relation-ship with someone who, you believe, will be fair, you may be more moderatein your demands.

But if there is no relationship at all, what do you do?Will you be moderate in your demands, assuming the other person will in

turn be fair with you? Will casting your proposal in moderate terms leave youwithout negotiating slack if your reading proves untrue?

The Place Not to Be Scene

Think of a person you know, someone outside your household. Perhaps acousin. Or the person with whom you had lunch yesterday. Maybe it’s the last


person you negotiated with. It may even be your next-door neighbor. Let’s callthat person “Bill.”

Now let’s use a classic scenario to highlight how relationships impact andmodulate your bargaining course of conduct.

The set: A jail cell.As the scene opens, you are placed in the cell. You have been justifiably

arrested for armed robbery. You are told that your accomplice, Bill, is in a sepa-rate cell off-stage.

A prosecutor enters the scene. She tells you that she does not have anopen-and-shut case and is therefore making the following offer separately toyou and to Bill:

If Your Years Bill’s Yearsin Prison in Prison

Each of you confess 10 10You confess and Bill is silent 0 20Each of you remain silent 3 3You are silent but Bill confesses 20 0

The Prisoner’s Predicament

Will you:• Remain silent, assuming Bill will do the same (an optimization

strategy yielding just three years in jail for each of you)?• Confess, hoping Bill will remain silent (an opportunistic strategy

whereby you would walk)?Your decision will rest entirely on how you read Bill’s character, personality

traits, and needs. This reading will only be possible because of a preexistingrelationship. If the relationship has been casual, the reading will be cursory—andcould be wrong. If your relationship with Bill has been one of long duration,you’ll be able to read Bill with greater certainty.

The next time you spend time with the person you have designated as“Bill,” propose the scenario, write down your secret-ballot decisions, and seehow well you really know each other.

Family and Friends

She Got the Gold Mine, I Got the Shaft(Title of a song recorded by Jerry Reed.)My law partner, Fred Glassman, is a brilliant divorce lawyer. His talent en-

ables him to score one resounding “victory” after another. In a straight numbersgame, Fred knows how to win big.

Relationships 85

He is sought out by clients who want to pay the least possible amount ofalimony, have rock-bottom child-support obligations, or extract the last dime ina community property division contest.

But Fred no longer has a pure “rack up the points” approach to his cases.He will tell you that, as a result of becoming more relationship sensitive, he has anew effectiveness. Clients are happier, and Fred receives far fewer calls fromclients that begin with I have a problem and continue with My kids don’t want tosee me anymore or I don’t get invited to family functions anymore or My family hasdisowned me.

Parties in a divorce often feel retaliatory, but Fred knows that custody of adining-room set is not as important as a family relationship, and that there ismuch more to be achieved in dismantling a marriage than calculatingly dividingup appliances, furniture, cars, and offspring.

Fred has learned that winning can be defined many different ways. He nowrealizes that a spouse is a spouse for as long as the marriage lasts, but an ex-spouse is forever. He also knows that the relationship of the parties—whetherfriends, partners, family, or almost ex-family—may be worthy of special negoti-ating consideration.

Pollyanna gobbledygook?The day the Muhammad Ali divorce settlement papers were signed in our

offices, the Greatest drew sketches for our staff as his way of saying, “Thanks forbeing nice.” The next day, our client, Veronica Ali, appeared on Good MorningAmerica telling a national television audience about her “dream divorce.”

The Contractor’s Trilogy

In some situations, there may not be a preexisting relationship. But will thedeal itself give rise to a new ongoing relationship?

First Script

You want to build a new home. The contractor with whom you are dealinghas fallen on hard times. He is prepared to take your job even though he willlose money; he has to keep his crew working. You are wondering why “OurLady of the Upper Hand” has smiled on you with such great favor.

As the prospective home builder, will your terms be predatory? Hard?Moderate? I suggest they be moderate.

Second Script

You want to buy construction equipment. The contractor with whom youare dealing has fallen on hard times and must immediately sell some of hisequipment to raise critically needed cash.

As an equipment buyer, you have no reason to be moderate, and an op-portunistic bargain may be the best bargain.


❍❍❍❍

The difference between the first script and the second is whether the ne-gotiations will give rise to a new ongoing relationship.

Ask anyone who has ever built a house. The most difficult negotiationsoften occur after the deal is signed: postcontract changes, modifications, delays,call-back work—all traditional opportunities for retaliation. In the first script, anew ongoing relationship must be reckoned with.

There is not, and will never be, an ongoing relationship when you bargainto buy used equipment, or you bargain at swap meets, or you bargain to buyfirewood, or you bargain with street vendors in Puerto Vallarta. These are allexamples of what is referred to in street lingo as popcorn deals—marketplacetransactions of limited scope. With no lasting relationship to consider, a goodbargaining result can be as one-sided as a flood.

Who is the real winner—the person who is told You have a deal. It is apleasure doing business with you or the one who is told You have a deal. Of all thelow-down cheap propositions, yours is the best?

The answer will depend on whether there is or will be a relationship topamper.

Third Script

You want to buy a home. The contractor with whom you are dealing hasfallen on hard times and must immediately sell the home he built several yearsago for his family. It will take two months for the sale to close and title to transfer.

As the home buyer, how hard a bargain will you drive?You may want to take a bargaining stance somewhere between the mod-

eration shown in the first script (building a house) and the opportunistic bargaindriven in the second script (buying used equipment).

There will be times when the alienation of the other side will not be asimportant as the victory of the moment, when winning will be quantifiablymeasured by what is in hand right now.

In the third script, if you buy the family home too cheaply, will theseller try to break the contract if a more attractive opportunity presentsitself? Possibly so. As a member of the great loophole industry, I can attestthat there is no such thing as a contract that can be guaranteed as absolutelyunbreakable.

In some bargaining situations, both sides should walk away from thehaggling with something more than scars and bruises for their efforts. Attimes, it will make good sense to leave something on the bargaining table tolessen the chance that the deal will sour. That something will be the differ-ence between walking away with a great deal and walking away with an ex-ploitative one.

Relationships 87

You do not deal with everybody in the same way. Old and newly

created relationships are an analytic in determining your

negotiating objective.

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C H A P T E R 16

Power

The Insurmountable Opportunities Factor

Negotiating power is a choice point analytic. Power is an enigma—

it can be very real or only a state of mind. Understanding power is

understanding how it is lost and how it is created.

Sam has been interviewing for a job in his hometown for three weeks. Sofar, not even a nibble. Similar to his car, Sam is fully detailed: salon-perfect nails,shirt creased, hair styled. His Florsheims still have shiny soles and he is wearinga new suit that his salesman guaranteed him would boost his self-esteem. Sam’sresume is on high-quality bond paper.

Sam is now walking into job interview number six.Hal has been interviewing for a job in his hometown for three weeks. Even

though Hal is no more capable or personable than Sam, somehow he hasmanaged to bag two interesting offers and the prospect of a third. He is wearinga suit he bought a few years ago, but only someone with an extraordinarily keensense of fashion would know it was yesterday’s news. Hal’s resume appearsshopworn. It was on the back seat when his dog jumped into the car.

Hal is now walking into job interview number six.Who has the superior negotiating power, Hal or Sam?Hal.Hal has something Sam doesn’t have. He has options. His options give him

the ability to take risks.


Hal is not committed to negotiating a deal. Other job opportunities areavailable to him. They are the fall-back opportunities that give Hal the ability to setlimits and to take risks.

Sam, the job applicant who has not received a job offer, won’t be able to assuccessfully discuss salary, benefits, and vacations.

Recall your last south-of-the-border vaya con Kaopectate vacation? You madea final offer to a street merchant and sauntered away. How he followed, some-how walking backward in front of you with the grace of someone with eyes inthe back of his head. How he met your price precisely at the moment your foothit the first step of the tour bus.

Give it some thought. Haven’t your most successful negotiations almostalways been conducted at times when you really didn’t care whether youmade the deal or not?

In not caring too much about the outcome, you allowed yourself to takebigger risks. You were free from the pressure and anxiety of having to enterinto an agreement or make a commitment. This freedom to say I pass is theprimary source of negotiating power and should be a determinant of howcooperative or exploitative you will be in setting your terms.

The One That Got Away

Last year, good friends came to me for advice.For more than a year, my friends had been looking for “just the right” 1953

Corvette. At long last, a wonderful ’53 was put up for sale. The price was onthe high side. My friends understood on good authority that two other ’vettebuffs had already submitted offers.

My friends needed to know whether they should:• Propose an extremely low price.• Propose a price close enough to the asking price that it would be

accepted without further negotiations.• Propose a price somewhere in between.

When you are bargaining for something unique—a custom cabin, a classicCorvette, an antique clock—it is important to understand what you are bargain-ing for. What is your primary objective: to get the best possible price or thestrongest possible commitment?

When you don’t have fall-back options, a commitment may be more im-portant than price. In these situations, what you think you are overpaying is thepremium for not losing the deal.

After I explained this to my car-buff friends, they proposed a price that wasclose to the asking price. Their offer was accepted without further negotiation.

Power 91

More Power to You

At a seminar-workshop, Art, an architect, told the class that he was neversure whether to bid high or low on prospective jobs. Here is how my classaddressed Art’s dilemma.

Art, who is negotiating a major design project, knows that the lower his bid,the less risk he has of losing the job. The higher his bid, the greater his risk offalling out of negotiations. Times have been tough lately for the building indus-try in general.

In setting his bid parameters, Art will weigh his options and evaluate his fall-back positions by assessing what other work may be coming in to pay the rentand the staff and to put milk on the table.

Reality Check

Art would be lulling himself into an illusory sense of well-being if his fall-back possibilities were only so-so alternatives: writing an architecture book, en-rolling for postgraduate study, or guiding visiting Americans on a tour of theclassical architecture of Greece. In combination, his list seems viable, but thechoices have to be looked at individually. Unfortunately, Art doesn’t have adependable, bankable option in the bunch.

All is not lost, however. Art can create options where none existed before,but first he must consider realistic alternatives:

• Moving to an area that isn’t as economically depressed as hishometown.

• Promoting the remodeling aspect of his business, knowing thatpeople will often remodel when new construction becomes pro-hibitively expensive.

• Working for the city in its building permit department.• Going “in-house” for a major franchiser or chain retailer that has

expansion plans and needs an architect.From realistic alternatives come true options. Art likes the alternative of

going in-house and the security of a salary. In psyching himself for the jobinterview, Art knows he has an option (the ability to bid low to win the designproject back home), which gives him both leverage and confidence.

If offered the job, Art has the ability to risk bidding high on the designproject: He knows that the job offer is a fall-back option. Art’s leverage posi-tions are strengthened even more as he creates and adds other contingencyplans to his list of options.

In negotiating the design project or in negotiating the job, Art now has thepower of options—the power to pass, the power to walk. He has the essentialelements of control. Art has, in fact, created negotiating power.


The Infomaniac’s Edge

Tapping into scuttlebutt power means knowing how to plug into the grape-vine. Secretaries, maintenance workers, clerks, salespeople, and receptionists allhave inside information.

Here are some other sourcing tips:• Real-property title reports contain telltale signs of financial pressure.

Look for recent borrowing collateralized by real estate, creditors’liens, unpaid property taxes, and pending foreclosure actions.

• Personal-property lien indexes may disclose signs of financial pres-sure. Note any mortgaging of equipment, fixtures, and accountsreceivable.

• Private credit-reporting companies, such as Dun & Bradstreet, Equifax,and Experian make their information available only to subscribers.A friendly subscriber, such as your banker or a business friend, maybe willing to bend the rules and order a report for you to see.

• Credit-investigating services are available to the public and can sup-ply comprehensive financial profiles. If the deal is big or impor-tant enough, a service fee may be your best investment of theyear.

• Litigation records and court files will reveal the other side’s prob-lems and motivations.

In one recent instance, our firm found that an investment property wasbeing sold because of a “secret” divorce.

On another occasion, we found that a substantial manufacturing businesswas being sold because its two owners were in litigation with each other. Thecourt, with the wisdom of Solomon, had ordered the business sold. In thisinstance, the parameters of an acceptable deal were part of the public record.

Practice tip: When do you start to gather information? Early! Once negotia-tions start, friendly, folksy, seemingly innocent small talk suddenly takes onthe character of highly confidential information and critical facts becomemuch harder to pry loose.

How much effort you put into information gathering is simply a functionof what is at stake. Calling every plumber in town to save a few bucks on fixinga stopped-up drain doesn’t make sense. Calling every Mercedes-Benz dealer inthe county to get quotes on that new sedan you admire does. As long as youwill realize a reasonable return on your effort, it makes sense to spend the timeand money gathering information.

Power is the ability to say “I pass.” Power can be measurably

real and absolute. Power can also be a state of mind. Power

does not exist in the abstract; it is always relative.

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C H A P T E R 17

Basic Training

Bombs-Away Bargaining and

White-Knuckle Horse Trading

You have established a negotiating goal by defining “winning.” Now

is the time to implement hard-bargain tactics to achieve that goal.

I’ve never been into collecting antiques, stamps, or miniature elephants. Icollect negotiating tricks.

I have gathered these tricks the world over, in places as near as downtownboard rooms filled with sophisticated strategists cutting mega deals and as faraway as third-world marketplaces where streetwise kids haggle for squawkingstewing hens as if their family’s next dinner depends entirely on their savvy.

In the remaining chapters of this book, I am able to share with you part ofmy collection: the best of the best tricks.

The Winner’s Curse

You have decided to sell your camper. It would be your lucky day if yougot $9,000 for it. You are approached by a buyer who offers to bring you$11,000 by the end of the day.

What would your best bet be?


• Counter.• Accept the offer without another word.• Tell the buyer you will consider the offer.

Lessen the chance of what Madison Avenue calls “postpurchase evalua-tion” and others call “buyer’s remorse” by countering, even if the counter is anunimportant condition.

In the camper situation, your counter might be, “You have a deal providingI can remove the bookshelves.”

M.K. is a certified public accountant who does a pretty fair job of budgetingfor everybody but himself. The offer I made M.K.’s banker to restructure hislong-past-due loan was borderline reasonable. It was, I figured, a place to start.To my surprise, the banker accepted the proposal without hesitation.

Instead of feeling like a winner, I felt a sense of disappointment and frustra-tion. I wondered how much better I could have done. For days, I had naggingthoughts about reopening the negotiations.

People aren’t happy with a deal they haven’t worked to get. Accepting aproposal, no matter how perfect, without some haggling is dangerous. Negotia-tors need to negotiate. They need a sense of mastery. When a deal is too easy,they assume that something is wrong.

Practice tip: Use long pauses to avoid an impression of eagerness. Quickresponses are not demonstrative of a hard-driven bargain.

Head First? Feet First?

Melissa owns a small vacant lot at Vista del Condo. You want to buy it. Thelot is not formally on the market, but you have heard from friends that Melissais thinking about selling.

Lots in the neighborhood vary a great deal in size, distance from the lake,and view. There are no accurate comparables to determine price.

Rather than proposing a price, Melissa has suggested that you “make anoffer” to purchase.

Should you:1. Encourage Melissa to first propose a price?2. Make the initial offer?

Who should make the opening move? Consult your intuition.

1. The case for encouraging Melissa to first propose a price: Why lose thisone-time opportunity to ascertain Melissa’s limits without havingto disclose your own? Once Melissa has announced her price,you know her ceiling. Her upper limit has been crystallized. Canyou recall ever being prepared to give up much more than whatwas demanded by the other person? Melissa’s opening moveestablishes her parameters without any cost to you.

Basic Training 95

2. The case for your making the initial offer: If you let Melissa make theopening move, you are asking her to establish a position. Peopleoverzealously defend stated positions, retreating only begrudgingly.

Anchors Aweigh: In a university study, Group 1 real estate agents weretaken to a house where they were given a talk on neighborhood values andwere told that the asking price of the house was $65,900. Group 2 real estateagents were taken to the same house and heard the same pitch with oneexception—the asking price was bumped to $83,900.

Both groups were independently asked to make their own estimates of thevalue of the house. Group 2 agents set the home’s value more than $6,000(almost 10 percent) higher than the estimates of Group 1 agents.

Supply people with data—any data—and they tend to use it. This behavioralpropensity is known as anchoring. The first price thrown out by either party canbecome a bargaining anchor even though that initial price may be unreasonablyinflated or deflated.

Still not sure who should make the opening move? Then first considertesting, testing, testing.

“Melissa, this is an unusual lot, but a somewhat comparable lot sold lastsummer for $9,000.” This nonpositional opening allows you to read Melissa’sreaction while mentally preparing her for your low offer. If Melissa wants totest the waters, she will now tell you about high-priced lots that she considers“comparable.”

Practice tip: Grab a price break before making your opening move:

“What is the most this store has discounted this big-screen TV?” You maynot bag a true answer, but some price reduction may be offered for havingtested the waters.

Spanish Rice Principle

In public junior high, my friends and I lived and died by the school cafeteria’sdaily entrées, which were posted a week in advance. Because “Children arestarving in China,” a clean plate was mandated by the school. (It wasn’t until Ivisited Beijing that I learned kids in China don’t eat tuna noodle casserole, meatloaf, or tamale pie.)

Spaghetti was everyone’s big favorite. Spanish rice, although always themost colorful, was barely tolerated. Fish (gag!) was the worst of all possible fates.

Imagine our despair one week when news of a mistake leaked out: themenu was in error. For the coming Friday, fish would be replacing spaghetti. Anannouncement that a six-day school week was just around the corner wouldhave been less of a blow.

Imagine our sense of elation and relief when a few days later it was re-vealed that the fish rumor was totally false. Spaghetti was being replaced not byfish but by Spanish rice.


Why was everybody suddenly happy about so-so Spanish rice replacingwonderful spaghetti? Because, when compared to fish, Spanish rice lookedterrific.

A person who expects less and receives less will be more satisfied than aperson who expects more and receives less. Happiness is relative to expecta-tions. You can make the other person happy by first disappointing him.

Want kids to be happy with Spanish rice? First tell them you will be servingfish.

❍❍❍❍

I love telling my crisis-management clients and students the following story.Is it true? I have never really known for sure.

A bookkeeper was hysterical as he confessed to his friend that earlier in theday he had stolen $10,000 from his employer’s safe. Prison, it seemed, was amore attractive alternative than what his bookie had threatened.

When the friend asked how much cash was left in the safe, the bookkeepersaid, “About $90,000.”

“Bring me the rest of the cash,” the friend instructed. “I have an idea thatmay keep you from going to prison.”

An hour later, the bookkeeper dutifully reported back to his friend with theremaining money. The streetwise friend, knowing that happiness is relative toexpectations, telephoned the company president: “Your bookkeeper has juststolen $100,000 from you. You will be happy to know that he will agree toreturn $90,000 if you agree not to press criminal charges and further agree torelease him from any liability.”

The president said a prayer of thanks for being able to recover 90 percentof what he had lost.

You were in a fender bender. Both you and the other driver were partiallyat fault. Everything is fine now, but you have had your share of aches and pains.Hoping for a $5,000 insurance settlement, you daydream of a dozen ways tospend the money.

When the insurance adjuster finally makes you an offer, it is for a heart-clutching $1,200. (You have just been told that the insurance company is serv-ing fish.)

• With a $1,200 offer, are you still going to expect to get $5,000?• Which initial insurance company offer would have maintained

your level of expectation close to $5,000: $2,800? $3,300?$4,200?

Offers impact expectations. Expectations impact goals. With a $1,200 offer,you will now be content to get a decent settlement, even one much less than$5,000. (Spanish rice is starting to look good.)

Basic Training 97

Since birth, most of us have been conditioned to be moderate in our de-mands. We are taught that nice people are always reasonable in their wants. Butextreme demands yield the best bargaining results. Agreed: your chances ofdiscouraging the other side from doing business are greater with extreme de-mands. But over a period of time the increased rewards will far outweigh thelost deals. The realities are: most people set their bargaining goals too low, andpeople who want more get more.

When I suggest you open extremely high if you are a seller or extremelylow if you are a buyer, I’m not giving you a license to be totally unreasonable. Acrazy position will not create interest and will not be a bargaining anchor. It willbe taken for exactly what it is. Crazy.

May the Force Be With You

After several offers and counteroffers, you have finally offered Melissa $9,800for her lakeshore lot. Her counteroffer is $10,600. At what price will an agree-ment probably be struck?

• $10,000.• $10,200.• Some other amount.

Keep these behavioral propensities in mind:• When coins are flipped, the great majority of people (90

percent in one test group!) will choose heads rather than tails.• “Head for the line on the left, since most visitors automatically

head for the one on the right” suggests the Official Guide to WaltDisney World.

• The chance of reaching agreement at a “let’s-round-off” number($10,000, in the Melissa illustration) is second only to theprobability of reaching a numerical “let’s-split-the-difference”compromise, $10,200.

Play to the force of magnetic numbers by tactically putting yourself in a posi-tion where propensity power is working to your advantage. Plan several movesahead, making offers and counteroffers that will “naturally” lead to your precalculatedcompromise proposal to “split the difference” or “round off.”

Practice tip: A more extreme opening offer provides you the space to edgetowards a winning “let’s-split-the-difference” compromise proposal.

The Terms and Conditions Game

At long last, you and Melissa have agreed on a price. You are now ready todiscuss financing terms, a closing date, who will pay the title insurance pre-mium, and other essential issues.

Should you bring up these issues:


• Collectively, so that they can be considered by Melissa in theaggregate?

• Individually, starting with those least important to you?• Individually, starting with those most important to you?

Introduce your terms and conditions incrementally—an issue at a time,starting with those that are most important to you. Be extreme in your terms.Ask for more than you should reasonably expect.

There may be some rejections, but presenting Melissa with some items shecan say no to will give her a needed sense of bargaining mastery. Terms andconditions not accepted by Melissa should be set aside and dealt with only afteryou have gotten as many yes responses as possible.

(Melissa will do better if she does not allow you to present your terms inpiecemeal fashion, reserves her response until all issues are on the table, andthen evaluates the picture as a whole.)

Those Winning Odds

With some sense of bewilderment, I observed that prospective auto bodyshop customers just weren’t bargaining. Customers were happily accepting es-timates as if they had been handed down from Mount Sinai on tablets of stone.Two facts became readily apparent: (1) this marketplace phenomenon hadnothing to do with insurance coverage, and (2) the sacrosanct bids were veryodd and very precise amounts: $3,127.48, $2,617.63, and so on.

Think about it. If the bids had been round estimates like $3,100 or $2,700,the customers’ normal reflex reaction would have been to roll up their shirtsleeves, plant their feet in a batter’s stance, and go for the discount.

People bargain when the quoted amounts are round and easy. Roundnumbers come with a built-in invitation to haggle. They don’t sound real orfirm. They sound like what they probably are—ballparkish and high.

Because odd amounts sound less susceptible, more real, and more like theresult of considered deliberation, people are less inclined to negotiate anychanges.

When they do negotiate an odd amount, people expect less of a conces-sion than they would with a rounded amount. Enough said.

Next time numbers are in play:• Punch some keys on your calculator.• Pensively leaf through a catalog.• Repunch the calculator.• Pick up a list of numbers and run your finger down the page,

stopping somewhere in the middle.It doesn’t matter if your odd number is truly a deliberated figure, as long as

it appears to be well-thought-out.

Basic Training 99

Bad Breadth

I have a better proposal from your competition.—Every buyer since the dawn of humanity

Prices will be increased momentarily. My inventory is dangerously depleting.—Every seller since the down of humanity

Michael confided that he was depressed. On a recent sales trip, all he’dheard was that his prices were “too high,” that he was “ridiculously expensive,”that “last year’s prices were much more reasonable,” and that “the competition’sprices are much more attractive.” The motivator buttons had been punched,and Michael was torn between lowering his prices to recapture lost businessand holding the price line.

Gail, one of Michael’s customers, finds Michael doggedly inflexible when itcomes to price.

The Persuasion Equation

Gail and Michael are barreling toward each other on price, a narrow, one-lane bargaining route.

A collision is inevitable. There is no room to maneuver on a one-laneroute. Both Gail and Michael need to widen the route by creating new lanes.

Buyers don’t buy things. They buy deals. Price is only half the equation. Theother half is the deal. Price = deal.

A deal is made up of terms or components, each of which, like price, is abargaining lane. These are the bargaining lanes of a deal:

• Finance lane. Cash or credit, interest rates, terms, discounts forearly payment, quantity discounts, prices of extras and add-ons,collateral, or security.

• Risks lane. Warranties, guarantees, inspection procedures, repairs,downtime.

• Delivery lane. When, where, and how deliveries are made; whopays the carrier; who is responsible for damage; late penalties;packaging.

• Relationship lane. Exclusive selling rights, advertising allowances,sole supplier rights, guaranteed minimum purchases, training,ongoing support, duration of contract.

• Specifications lane. Allowable variations, quality tolerances.Michael can add bargaining lanes by restructuring the equation: lesser price

= lesser deal. “Yes, I can lower the price if I don’t have to individually packagethe units and if you will pay on delivery.”

Gail can create lanes by agreeing to Michael’s price if Michael expands the deal:same price = expanded deal. Anything that would cost Gail money is worth money.


Gail may also request concessions she doesn’t really care much about. Why?Because if Michael can’t or won’t agree to Gail’s requests, there is a good chancethat Michael may reduce his price. In this instance, Gail’s nonconfrontationalmaneuver is in effect an oblique run at Michael’s price position.

Gail’s tactical give-and-get word is if: “I will accept your price if you willdeliver and if I can pay in 90 days.”

The Take on Give-and-Take

Call them give-and-get or give-and-take, or bargaining back-and-forth moves.Concessions are an essential element of deal-making. Here are four things youmust know about making concessions.

1. No One Can Take Just One Concession

No one can eat only one peanut, or take only one potato chip, or ask forjust one concession.

If you are tough in doling out concessions, you will dampen the otherperson’s bargaining aspirations. Granting quickie concessions is a sign of insecu-rity and weakness. The other person will gain self-confidence and will becometougher and more demanding.

2. We Aren’t Talking Checkers

Many folks think it is unfair or rude not to meet a concession with a recip-rocal concession. All our lives, we have heard popular platitudes that reinforcethis notion: “One good turn deserves another”; “You scratch my back and I willscratch yours.” These are myths!

Bargaining is not a game of checkers. There is nothing organized aboutbargaining, and there are no rules mandating that my move is followed by yourmove followed by my move.

3. Nothing Is for Nothing

Everything has an exchange value.Bargaining is about trading. Bogus issues can be introduced for no purpose

other than conceding them in exchange for something else. A trader will con-vert molehills into mountains simply to inflate the importance of throw-awaypoints and use them for extracting concessions.

Suppose the other person insists on delivery in two weeks. Delivery isviewed as a primary point.

Your company could easily deliver in one week. Delivery to you is a throw-away point. A boastful no problem would normally be your unhesitating response.But why toss out your throw-away point when, with some puffing, it can appearto have primary point status? If you want delivery in that short a time, the cost will be10 percent more.

Basic Training 101

Keep the quid pro quo myth alive. Remind the other person that beingwell-bred means courtesy, diplomacy, and, above all, concession reciprocity.

Soft Touching: Grant a minor goodwill concession now and then, withoutasking anything in return.

4. Small Fish Look Bigger in a Teacup Than They Do in a Pond

Competing within blocks of each other, A-1 Electronics and Hitech Electronicsare equally reputable retailers of consumer electronics.

You are in the A-1 store, getting ready to purchase a Panasonic telephoneanswering machine for $54. A friend who happens to be in the store tells youthat the Hitech store a few blocks away has a special promotion on that verymachine and is selling it for $27.

Are you going to: buy from A-1 for $54, or buy from Hitech and save $27?You are in the A-1 store, getting ready to purchase a Sony television for

$1,350. A friend who happens to be in the store tells you that the Hitech storea few blocks away has a special promotion on that very television and is sellingit for $1,323, a discount of $27.

Are you going to: buy from A-1 for $1,350, or buy from Hitech and save$27?

You are like most of us if you would go to Hitech to save $27 on theanswering machine but not to save $27 on the television set.

The physical effort to get to Hitech and the $27 savings are identical in bothinstances. The only variable is the percentage of savings. There is a 50-percentsavings with the answering machine, but only a 2-percent savings with thetelevision. Perceiving the concessions relatively (as a percentage) rather thanabsolutely ($27 cash savings) explains your willingness to change stores only forthe answering machine.

How you couch a concession may make all the difference between whetheryour deal locks in or goes off the screen.

You are a new-car dealer who has quoted a potential buyer a $20,000purchase price plus a $1,000 extended-warranty fee. Having already made aconcession from sticker price, you are prepared to make an additional $500concession to sew up the deal. Your tactical choices as to how to cast the $500concession are: reduce the extended-warranty fee by 50 percent or reducethe purchase price fee by 2.5 percent.

Reducing the warranty fee by $500 has the impact of “slashing” the fee inhalf. Reduce the purchase price, and you are not slashing anything. You areonly nibbling. Your concession will be perceived as being greater if it is offeredas a percentage discount off the smallest fee item: If you are prepared to buy now,I will reduce the warranty fee by half.

This time-honored principle of perception management is best rememberedby passing on some advice from Jack LaLanne.


On the eve of his 70th birthday, the fitness guru stated that his reasons forwanting to stay thin and fit were based on a simple formula:

“Every two inches you take off up here...makes your business down therelook an inch longer. Isn’t everything relative? If you have a 50-inch waistline,the thing doesn’t look very big, does it?”

Hard-bargain “basic training” comes with a reminder: A soft

touch will prevent resistance while yielding a better and more

stable result. Hard-bargain deals are easier to close when egos

have been coddled along the way.

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C H A P T E R 18

Mind Tricks

The Squish Factor

Manage how other people feel about themselves and you manage

how effectively they will negotiate against you.

Technique is what makes a soft-touch style compatible with a hard-bargainstance.

Technique is the art of performance. Adopt a soft-touch style and your hard-bargain plays will not appear calculating or manipulative. Hard-bargain playsshould come across as unplanned and spontaneous.

The soft touch of the persuasion progression is advanced throughout thehard-bargaining process. Personalization, rapport, involvement, and identification—the hallmarks of the “Gentleman Bandit’s” likable way—must continue as anintegral part of the persuasive process.

Tip: See How to Win Any Argument (Career Press, 2005), Chapter 2 (Con-struct a Consent Zone), and Chapter 3 (Link Inside the Consent Zone).

Technique is also the art of application. The same paint can be applied with afine brush or an industrial roller, depending on what is to be accomplished.


Soar Like a Turkey

I was feeling like an eagle. And why not? Later in the day, I was sched-uled to meet with the board of a national health-care outfit interested inretaining the services of our law firm. Was I ready! A freshly pressed favoritesuit was set off by a new, thoughtfully selected Polo tie. My car, which alwaysseems to perform best when it sparkles on the outside, was freshly waxed.Most often, small things have the greatest impact and modulate how we feelabout ourselves.

For me, the metamorphosis from eagle to turkey was an easy one. A fewdrops of Chin Chin’s Szechwan dumpling sauce splattering on my tie duringlunch was all it took.

From the moment the sauce found its mark, I was mentally no longer atthe top of my game. To the outside world, those spots were probably barelynoticeable. For me, they were the consuming focal point of my entire being,and I felt self-conscious and uneasy.

If it’s not one thing, it’s two: If you have ever been nudged off-balance by aspotted tie, a dangling coat button, a bad hair day, mismatched socks, or ahurtful remark, then you have experienced what this chapter is all about: those“small things” that clip people’s wings so they will soar like turkeys.

The Bleeding Edge

Maybe you’ve felt it before. I have.That zingular sensation. A roller-coaster drop in your negotiating expecta-

tions when the other person:

• Constantly reschedules your appointment.• Keeps you waiting in a reception room.• Tells a secretary to hold calls for about five minutes, or, even

worse, lets your meeting be interrupted by a stream of incomingphone calls.

• Uses an esoteric vocabulary.• Makes adverse comments about you, your company, or your

products.• Looks and acts with total indifference toward your proposal, looks

more at the clock than at you, and gazes around the room.• Conducts business with you and a staff at the same time.• Forgets or mispronounces your name.• Reels off a list of his or her company’s international branch offices.• Asks about people, places, and things you know nothing about

(Can you recommend a restaurant in Sydney?).• Praises the competition.

Mind Tricks 105

• Asks for your bank references.• Hits you with rapid-fire percentages, big numbers, and so on.

Torpedoes du jour: When I was in the service of God and country aboarda navy cruiser, I witnessed how a fellow officer emotionally devastated anddemoralized a goodly part of the ship’s junior-officer complement with a well-thought-out “Gotcha!” Jim spent the morning walking the passageways andwhispering caringly to his shipmates, “I don’t care what anybody else says, Ithink you are doing a good job.”

Wanton Soup

Sometimes it happens at a family Thanksgiving get-together. Or perhaps ata friend’s home. You just know that every once in a while you are going to bethe one who ends up sitting on a folding chair at a dining table. Being seated aninch or so lower than other guests leaves most of us feeling uneasy, less talk-ative, and out of it.

In the game of psychological one-upmanship, points are scored when theother seating in the room is shorter than the “power chair” at the head of thetable. There is a correlation between table shapes and chair heights and theability to convince and influence others.

Sound like musical-chairs nonsense?Maybe so, but while the Vietnam war raged on, negotiations at the first

Paris truce talks could not get underway for days because peace-loving emissar-ies could not agree on the shape of the negotiating table.

Sitting at the head of a rectangular table can transform your aura from “I’mhere” to “I am in charge.” Why else is the head of the table always blessed withthe wine list and cursed with the check?

Admiral Hyman Rickover is known as the “father of America’s nuclearnavy.” In his obituary, Time magazine reported: “Winning a spot in Rickover’snavy was not easy: prospective submariners often had to sit before the oldcurmudgeon on an unbalanced chair whose front legs had been sawed off byseveral inches....”

Having negotiated his lease, I looked forward to viewing Hustler magazineczar Larry Flynt’s newly built out, full-floor Century City offices. Flynt’s per-sonal office was the longest I have ever seen. “Early Rickover” could best de-scribe the decorating effect, and it was perfect. Walking to Flynt’s desk seemedlike a journey. Feeling that my visit was suddenly taking on the aura of apilgrimage, I wasn’t sure whether I was there to see Flynt or to have an audi-ence with him.

Too much creature comfort can sometimes be as devastating as too fewamenities. If the other person is not used to opulent surroundings, the experi-ence can be terrifying.


When a big case for Inga was settled, I invited her and her husband to avictory celebration at Los Angeles’s premiere gourmet restaurant. For Inga, whosemost revered recipes start with a can of soup, my gastronomical offer soonbecame a stressful and disquieting experience as she and Sid stared in puzzle-ment at the four forks, two spoons, and four knives before them.

In the land-boom mid-1980s, I represented a Middle Eastern consortiumbuying $8 million worth of land near the Dallas Galleria. The land had been inthe sellers’ family for three generations—long before anyone foresaw that thiswould become one of the most fashionable sections of the city.

To my surprise, the lawyer representing the sellers—an elderly AfricanAmerican couple—insisted that the final papers be reviewed and signed in thefamily home. Three lawyers, two title officers, a banker, a mother, father,aunt, daughter, and grandson all crowded into a spartan living room for thepassing of title, money, and legal documents.

Why wasn’t the closing held 10 minutes away in a law suite that housedall of the staff, equipment, and facilities needed to efficiently conclude thetransaction? The sellers’ lawyer confided that his elderly clients felt intimi-dated by his firm’s luxurious downtown offices. The fact that they wereabout to become multimillionaires wasn’t enough to ease their feelings ofdiscomfort.

The persuasive fact of life is that people who are physically or psychologi-cally uncomfortable want their negotiations to be short—so short that a conces-sion or two to expedite the conclusion to a bed-of-nails situation may not betoo high a price to pay.

Feeling psyched out? Anxious? Submissive? If you swoon over their decor—Love the mid-calf high-pile carpets and the dancing water display in the receptionroom—you play to your own insecurities. Feeding the other person’s ego sel-dom helps and usually only makes matters worse.

Go Figure

Platinum blonde hair, blue eyes, classic features, an incredible figure—a 15on a scale of 10—my former next-door neighbor was a first runner-up in theMiss America beauty pageant. But nobody is perfect, and she had this devas-tating social problem: men were so intimidated by her beauty that they couldn’tcarry on a conversation with her, much less ask her for a date. A man nego-tiating with her might accelerate the negotiations rather than subject himselfto the tongue-tying uneasiness prompted by her presence. Other womenwho are considered classic beauties tell me that they too share this same para-doxical dilemma.

Short of suggesting plastic surgery, what does this discussion about beautyqueens mean to you?

Overt psychological intimidation can be accomplished by even the mostordinary among us.

Mind Tricks 107

There are times when you will painstakingly take on an image of warmthand approachability. At other times, you will opt for an aura of authoritativecommand. Sometimes, however, you may want to take your choreographyone step further by wearing, carrying, or arriving in power boosters that lessenthe other person’s resistance.

If a person’s power props—whether jewelry that would be the envy of amovie star, an alligator briefcase, or a limousine curbside—make you feel likethe third cousin to a second-class citizen, then you are being taken on a gilt trip!Your best defense is to understand that power props are only effective if youallow yourself to be intimidated by them.

The Old Bawl Game

Bill Cosby has this advice for grabbing the winning edge on the home front:“When discussions get heated, be the first to dash into the bathroom, lock thedoor, and cry.”

Anyone who has ever had to deal with a teary-eyed spouse knows thattears can be so disarming that rationality and logic are washed away.

Crying is an emotional tactic effectively used by both women and men.

The Force of Logic/the Logic of Force

A speech-course professor from the University of California at Berkeleytaught us that sometimes lions are better off not roaring. If what we have to sayreally makes good sense, then the overamplification of our voice will onlydetract from the message of our words.

Yet, though yelling is a boorish tactic, there may be times when raising yourvoice will get results. A loud voice can be effectively intimidating.

Best scream play: If you know the other person is a screamer, hold themeeting at a nice restaurant. A screamer who can’t scream is a fish out of water.

More sound advice: Keep the negotiations so structured and formal that thelikelihood of the other person’s yelling is minimized.

Ham on Wry

I have been present when clients have said, as calmly and calculatingly as ifthey were old-time method actors, “I am going back into the negotiating roomand I will be mad as hell. I might even throw a temper tantrum!”

For some would-be thespians, the head game is theatrics. Indignation andrighteous anger are contrived, premeditated, and acted out as a tactic to prompta concession by way of an apology or act of appeasement.

Never allow yourself to be goaded or lured into an emotional outburst. Ifyou know you are ready to explode, take a break. Speak when you are angryor upset and you will give the best speech you will ever regret.


Gullible’s Travels

A client’s palatial southern California home was devastated by an earthquake.The insurance carrier contended that much of the damage resulted from im-proper soil compaction when the lot was originally cut from the hillside.

After months of negotiations, the insurance adjuster told me that she wouldsoon be taken off the claim. She cautioned that unless her totally unacceptablesettlement offer was accepted, I would be forced to negotiate with the carrier’smost difficult claims supervisor. Although my client had become anxious and hadthought about capitulating by accepting the departing adjuster’s offer, she instructedme to continue negotiating. Within a few weeks, the supervisor agreed to a figureclose to my settlement demand.

Merchant of fear tactic: Putting the other person on notice that what theythink is light at the end of the tunnel is really a fast-moving freight train.Letting them know that unless a proposal is accepted, troubles will mount,costs will go through the ceiling, or, in my case, I would “hit the wall” whenmy client’s file was turned over to a supposedly inflexible supervisor.

Defensive tip: Don’t become desperate just because you are being told thatit’s always darkest before it’s totally black. Give the situation some thought.Ask yourself whether there is a genuine reason to feel pessimistic. DespiteChicken Little’s prophecy, the sky has never fallen.

Soul Erosion

The best-selling book is based on a simple truism: “People who feel goodabout themselves produce good results.”

Conversely, another best-selling book is also based on a simple truism:“The results a person obtains are inversely proportionate to the degree to whichthat person is intimidated.”

Two best-sellers, one lesson: manage how the other person feels aboutthemself and you manage how effectively that person will negotiate againstyou.

Some mind tricks are geared to gnaw away at the other person’s percep-tion of their negotiating power. To negatively charge their expectations. Othermind tricks have the specific purpose of causing the other person to becomeconciliatory, confused, or irrational.

There are also mind tricks that are a play on the power of because I said so.But then, according to one expert, authority is 20 percent given and 80 per-cent taken.

Mind Tricks 109

People who are uneasy are not at their negotiating best and

will grant concessions to extricate themselves from an

uncomfortable situation. In making these concessions, they will

be guided by their emotions rather than by their sense of

reason.

111

C H A P T E R 19

Sliders and Curves

Hold-On-to-the-Roll-Bar Negotiating

The fact that a hard-bargain tactic produces anxiety, tension,

discomfort, stress, or pressure does not mean that it can’t be applied

with a soft touch. Nor does it make it an unconscionable device.

Some tactics just aren’t as pretty as others.

Many of the tactics described in this chapter are mutually exclusive. Otherscan be used in combination. No one tactic is so universal a tool that it will workin every situation. Be intuitive. Pick and choose.

Soft touching: Don’t overkill. Too many is too much. You wouldn’t pleadinsanity to a parking ticket offense nor would you charter a Boeing 737 togo to Wal-Mart.

Practice tip: Most power plays are no stronger than your own credibility.Your persuasiveness quotient will always increase when you substantiatecritical facts and the source of those facts.

Numb and Number

Today’s the day of the Big Game. The World Series of Bargaining.It all takes place just after lunch at Big Ed’s Discount Appliances, home of

the “Big Deal.” You and your wife have decided that you will lead off for the AllStars. You will go it alone. Because you know exactly what you want to buy, itis now just a matter of getting the best price possible. And, of course, it is amatter of personal honor.


Immediately upon entering, you recognize Big Ed from his TV commer-cials, which air between 3 a.m. and 6 a.m., during the “Early Early Movies,” afavorite of yours because you are a big Kirk Douglas fan.

You know exactly what you are looking for in the way of a washer anddryer. It’s a combination with control panels whose beauty is made possiblethrough the miracle of simulated walnut. Quickly you find it halfway down themain isle. The ticketed price is $1,200. Big Ed himself approaches and you askif he will accept $1,000. “No!” is his unequivocal response.

It does not take a keen sense of perception to know that this fellow is in nomood to bargain. Needless to say, you are disappointed. For all of your adultlife, you genuinely thought that bargain and independent local retailer weresynonymous. Besides, where is the “Big Deal”? You struck out, and it is appar-ent that you have hit your slump.

It’s a new day. This time, your wife will go it alone at Big Ed’s. She is yourteam’s last chance to pull the game out of the fire.

Unlike you, she takes an hour and a half of Big Ed’s time comparing brands,debating the merits of gas versus electric, scrutinizing color charts, taking physi-cal measurements, reviewing warranties, studying upgrades, evaluating features,and having Big Ed write down vital product data. She “selects” the same $1,200washer-dryer combination and offers $1,000.

With about 20 percent of his working day invested in her, will Big Ed wantto start over with someone in whom he has no time invested? Someone whomay not be as “real” a buyer as your wife? Big Ed remembers from his highschool Modern Business class that, by definition, investments are supposed topay off. Your wife’s offer is accepted. She has become a bargaining superstar bycausing Big Ed to invest in her.

What if your wife were still bargaining at 6 p.m. on Saturday? Would Big Edchance losing his investment of valuable time by asking her to come back Mon-day morning to continue the dialogue?

Years ago, I was in Las Vegas with a handful of college friends. We spent halfour time gambling and the other half looking for each other in the cavernoushotel casinos. Goldberg, however, was easy to find. He had become a fixture ata crap table where he was losing his tuition, food, and book money.

“Goldy, why are you spending all your time at this same obviously un-lucky, very cold crap table?” we asked.

“I have an investment in the table,” he replied.

The Goldberg Effect

The greater the other person’s investment in time, preparation, or money,whether it be at a crap table, on a retail showroom floor, preparing a bid proposal,or obtaining relevant information as to your needs, the greater that person’spropensity to grant concessions.

Sliders and Curves 113

Buy, Buy

Confession of a reformed shopper: there was a time I really didn’t likeabout one-fourth of the clothes in my closet.

Maybe it’s because the fit wasn’t really that good, or the colors and stylewere not really me. In a way, each of these sweaters, coats, and ties was atrophy. A trophy for having waited patiently in the cold for a 50-percent-off saleto start. A trophy for being fleeter of foot and stronger of arm than those othershoppers who left the starting gate with me. So what if I never wore those saleitems more than a few times. A bargain is a bargain. The price was right.

Barbara, a legal secretary, saved for three years to treat herself to a Mediter-ranean cruise. One of the ports of call was Barcelona. The way Barbara tells it,she was walking down the Ramblas in the direction of the ship when she wasgreeted by a street vendor with a nonstop grin. Until that moment in time,Barbara had never given any thought to owning a black velvet painting ofBarcelona. Years later, Barbara is still not sure what happened.

“Señorita, will you buy a souvenir painting for $60?”“No, thank you.”“How much will you pay?”In a devil-may-care manner, Barbara, without thinking, said “$10.” After some

emotionally charged bartering, she paid a “for-you-lady special price of $43.”Had Barbara suddenly changed her mind, realizing that until this moment

she had been denying herself one of life’s aesthetic pleasures? No. Barbara hadbeen so sucked into the back-and-forth of haggling that hacking out a deal tookprecedence over her desire to not own a puce Barcelona bathed in iridescentgold and persimmon moonlight.

Suppose this vendor, this master of sidewalk psychology, had asked tour-ists, “Do you want to buy a souvenir painting?” He would have been out of thepainting business.

The Barbara Effect

When you let the bargain, not the item, become the objective of the barter-ing, the process becomes the product.

Planes, Trains, and Old Refrains

WARNING: Answering the following questions may be hazardous to yourdeal:

Don’t you believe me?Don’t you trust me?The preceding public service reminder was brought to you by a guy who,

while bargaining over custom-built wall cabinets with “Sam the Innocent,” acarpenter, was told, “I can’t go any lower...you are now getting a price which ismy cost plus 10 percent.” Silly me. I pressed on. Sam, with sad eyes and


Lincolnesque sincerity, responded, “Don’t you believe me?” I accepted Sam’sdown-to-the-bare-bones proposal.

Less than two weeks later, Sam agreed to build the identical cabinets forour neighboring tenants for 20 percent less than our “rock-bottom price.”

Anyone who is forced to declare that they believe or disbelieve the otherperson is leaving the safety of high ground and heading into a no-win trap.

• Telling Sam that I believed his price was close to his cost prohibitedme from further negotiating.

• Telling Sam that I didn’t believe him would have destroyed linkage witha person with whom I was about to have a working relationship.

Defensive tip: Few of us are visionaries. Let the other person know that “Itis not a question of whether or not I believe you or trust you.... The priceyou are quoting is just not acceptable.”

Auction Negotiating

Auctioneers tell me they can often agitate bidders into such a competitivefrenzy that when the hammer falls, the price will be far greater than the amountthat would have been paid for the same item in a gallery or store. In an auction,emotions come into play, and decisions are sometimes foolishly made.

Working or appearing to work with several competitors at the same timecreates an auction climate. The need to win races is sometimes fueled more byemotion than by logic. When emotions are summoned into play, irrationalconcessions are granted as part of the price of victory.

Defensive tip: If you find yourself in an auction, stop and grasp the realitiesof the situation. Your goal is to land a favorable agreement, not win a race.Any time your goal becomes beating your competition, you will only benegotiating against yourself.

Fast Food for Thought

I asked my client what in the world motivated him to buy his now verydefunct turkey pot pie franchise business.

“I was so busy qualifying myself as a hard-working, stable, sincere, energetic,God-fearing, peace-loving, financially capable franchisee that I never reallystopped to think about whether or not it was that good an investment,” was hisreply. Franchise sellers are masters of Don’t sell them—have them sell you hard-bargain table-turning.

College fraternities are often masters of negative selling. Rush chairmenrecruiting new members will ask: What school offices did you hold? What sports didyou letter in? What contests did you win? The rush candidate feels less and lessworthy of membership with each new question designed to elicit a None re-sponse, and his desire to join the fraternity increases proportionately.


Circling the Wagons

Does the name George Armstrong Custer ring a bell?A major U.S. computer manufacturer supposedly increased its sales volume

dramatically when it adopted the circling-the-wagons tactic. By surrounding apotential buyer with a wall of flesh—experts from engineering, sales, andprogramming—the outflanked buyer is literally overwhelmed into making theon-the-spot purchase.

(One of my workshop students has suggested that, in historical retrospect,it would have been wiser for our early settlers to move their covered wagonsinto a defensive square rather than a circle. Her reasoning was that the attackingwar parties could never have made all those sharp corners.)

Defensive tip: If the other person shows up with a team of gray-flannel com-mandos, grab one other person from your camp for emotional support. Twocan take on 10, providing they have the necessary facts and knowledge.

Every Book in the Trick

Not too long ago, and before they were regulated by law, book clubs wouldsend their monthly selection to anybody and everybody. It didn’t matter thatyou weren’t a member of the club and didn’t want the book. If the unsolicitedbook wasn’t returned within the specified time period, you were obligated topay for it. It was that simple and it was fait accompli marketing’s finest hour.

A leasing agent sent me a completed form lease with a request to sign it andreturn it with a rent deposit. Without saying a word to the agent, I crossed offseveral bothersome provisions, signed the lease, and mailed it.

The gambit is played out by acting as if a point has been agreed on, aconcession given, or an issue decided, even though no agreement has beenreached. By acting as if a matter is fait accompli, it becomes fait accompli.

Defensive tip: Negotiations are over only when you believe or want themto be over. Don’t accept other people’s terms just because they have foldedup the negotiating table and are starting to put it in the back of their van.

Anne of a Thousand Nays

Take No. 1

With a lump in your throat and a tear in your eye, you are selling your old,oak rolltop desk. The weekend-special three-line classified ad you are runningasks $1,500.

Anne: I will pay you $1,000.Hit the rewind button and let’s start over again.


Take No. 2

With a lump in your throat and a tear in your eye, you are selling your old,oak rolltop desk. The weekend-special three-line classified ad you are runningasks $1,500.

Anne: I love your desk and it is probably worth every penny you areasking. However, I have a decorating budget and I cannot afford to paymore than $1,000.Let’s compare takes.In Take No. 1, no explanation accompanied Anne’s offer. It appeared that

the worth of the desk was in dispute. As the seller, your intuitive responsewould be to decline the offer while extolling the desk’s numerous virtues tojustify your price.

In Take No. 2, Anne’s explanation makes it clear that worth is not an issue.Anne’s budget is the barrier. A budget, unlike worth, is so personal that it isbeyond rationale dispute.

Soft touching: Anne’s real or fictional budget has enabled her to avoid an-tagonizing you, the seller, with a worth confrontation.

The Missing-Man Maneuver

You know the drill. As you walk into the car dealership, Mr. Smooth comesover, shakes hands, and introduces himself—an unctuously overplayed person-alization tactic that registers negatively on your persuade-o-meter. Your knee-jerkreaction is to tell him your name too.

You find a car that does it all for you. After a half-hour of flipping throughesoteric loose-leaf binders and punching an adding machine, Mr. Smooth tellsyou the deal looks in place. A thousand hallelujahs.

As a formality, Mr. Smooth excuses himself to get management approval.Oh oh. When he returns, he tells you he has bad news. Because a philanthropi-cally low price was quoted for the shiny new car, he must now reluctantlyknock $700 off his allowance for your lackluster trade-in. If you prefer, thedeluxe wheels can come off the new car—a mind-boggling notion because hegot you with those wheels to begin with.

No Holds Bard

You know you will feel better about the whole experience if you can onlywrite a poem about Mr. Smooth. The problem is you can’t think of a word thatrhymes with “nausea.” Mr.Smooth did apologize eloquently without hesitatingor groping. But then this is a role he has gotten to play so many times before.The culprit? Higher authority: the missing man.

Sometimes the missing man, imagined as a cigar-chomping heavy hitter inthe back room, is nothing more than an illusion. While you are trying to enter-tain yourself by looking at third-place golf trophies, Better Business Bureau


plaques, and Chamber of Commerce certificates, some of these salespeoplewho are supposedly seeking approval from “higher authority” are enjoying acup of coffee in the back room with other salespeople.

Long before Ken Norton became a client of ours, we were retained by theVenezuelan government to negotiate on its behalf the Ken Norton–GeorgeForeman heavyweight boxing match. This first heavyweight prizefight ever heldin South America was to be the inaugural event at a lavish new government-owned sports facility in Caracas. The terms and conditions of the fight wereapproved by one department subject to the approval of another department,which was subject to the approval of still another.

As the deal—which everyone other than the Venezuelan governmentthought was concluded on at least five separate occasions—moved from bu-reaucrat to bureaucrat, additional concessions were extracted systematically alongthe way. The fight agreement was subject to approval by so many officials that itwas literally negotiated and renegotiated a piece at a time. The culprit? Escalat-ing higher authority!

Practice tip: Accountability to someone else means being on a short leash. Ifyou call on escalating higher authority, be miserly with your concessions.Granting too many concessions or too large a concession will destroy thetactic’s required appearance that you are acting under another person’sinstructions and have little negotiating latitude.

Defensive tip: Reach an agreement that is subject to approval by someoneelse’s management, partner, spouse, department head, committee, board,or whatever, and you are only negotiating against yourself.To seal the other person’s limited-authority escape hatch shut, ask at the

very outset, Do you have full authority? If not, who does? Do you have authority overprice? Terms? Delivery? Style?

The “William L.” Principle

My new client introduced himself as General William L., U.S. Marine Corps,retired. His 50ish appearance was central-casting perfect: crew cut, tan, andsternly businesslike.

I am not the only person who held this marine corps general in specialesteem. The City of Long Beach had offered him two highly prized concession-aire locations on the soon-to-be-opened Queen Mary. A Marina Del Rey yachtcompany had sold him a luxury 35-footer COD with no money down. Withina month, the boat was fully outfitted to his very exacting specifications.

If you haven’t figured it out already, I should tell you that the “general” wasa three-star phoney. William L. had been an enlisted Marine once upon a time,but that was about it.

A man wearing a white jacket and stethoscope walks into a hospital roomand lethally places a pillow over a patient’s head. A man with a toy badge isallowed behind locked doors by a woman he then victimizes.


A foreign agent puts on an enemy’s uniform to penetrate a command post.The doctor, cop, foreign agent, and “General” William L. can be successful be-cause they operate under a guise of legitimacy.

One savvy group of clients hired me to draft the toughest landlord-oriented lease ever uttered into a dictating machine. My lopsidedly biased ef-fort was then printed as a form. The clients added two words at the top, in largeprint: STANDARD FORM. Whenever a prospective tenant balks at an onerouslease provision, the response is, Sorry, but this is our Standard Form.

How often do people try to negotiate a change to printed bank-loan forms,store-credit agreements, and similar contractually binding documents? Mostfolks won’t even bother to read something so ordinary as a Standard Form.Those two words, the expense of printing, and the other person’s erroneousassumptions give the deal a nonnegotiable sense of legitimacy. People willunhesitatingly accept the written word if the printing is first-class.

Defensive tip: Standard Loan Agreement, Standard Installment PurchaseAgreement, Standard Service Agreement, Standard Rental Agreement, Stan-dard Financing Agreement, Standard Construction Agreement, StandardArchitectural Agreement—I have never read a contract prepared by a busi-ness or trade association that isn’t slanted in favor of the folks who paid tohave it drafted and printed. The printed word is just as negotiable as thetyped or spoken word, and there is nothing sacred about a three-part form.The luggage store where I bought a briefcase that I later didn’t care for

refused a cash refund. That was their return policy. I could, however, exchangethe briefcase for a store full of other things I didn’t care for either.

Policy is a word that creates an aura of legitimacy by implying: The die is castand please don’t bother me with your requests.

Defensive tip: When you are on the defensive end of a policy argument, tryto show the other person that the policy is not always enforced and istherefore not really a policy at all.If there is a truly existing policy, then show why it should not be applicable

to you:

Customer: I know that you have a no-refund policy, but the salespersonassured my wife that any man would love to get this sweater as a gift. Hewas wrong. I hate the sweater.

Play the perfection game when you are up against a fixed-price policy.Points are scored by finding as many imperfections as possible—a scratch, abump, a blemish, a dent, an imperfect match, a minute spot, an unexpected butbrief delay in expected delivery.

A top-seeded player will use these imperfections as the persuasive wedgeto extract a special concession, discount, or break.


Customer: I know this is a one-price store, but this washer is not in factory-perfect condition. If it were, I wouldn’t be asking for a price adjustment.Doesn’t your no-discount policy really apply only to mint-perfect mer-chandise?

Defensive tip: The parts of a house are not going to have the same precisionfit as the parts of a fine Swiss watch. Colors can never be matched exactly,and a Chevrolet will not have the same quality of paint job as a Bentley. Butwhat do you do with the nitpicker who even in bad light can spot angelsdancing on the head of a pin?

No one is entitled to more than reasonable perfection. A $150,000house has one standard and a $1,000,000 house has another. A steak atDenny’s is not going to be as good as a steak at the city’s finest restaurant,and neither will the service.

If the other person’s expectation level is objectively unreasonable, thenbe calmly firm. You can’t allow negotiations to focus on matters so triflingthat each side is running for its microscope.The printed equivalent of a verbal policy is a Procedures Manual. My neigh-

borhood service station manager brought out his manual to show me why Iwould get only 20 percent of the amount I paid 10,000 miles ago for a set oftires I was told would last 30,000 miles.

And then there is the price list. Quoting your prices verbally invites haggling.Print them as part of a price list and presto! They are granted an immunity fromany bargaining.

The Gidget Gambit

You have probably heard this one before. Maybe because it’s reminiscentof a summer romance movie: boy makes deal, boy loses deal, boy fights to getdeal back.

My neighbor’s newly pruned trees made my yard suddenly look over-grown and neglected. I felt enough shame that I decided to call the same gar-dening outfit. A tape machine answered: “International EnvironmentalCorporation, formerly Henry’s Tree Service.” My reaction was the same as if alimo had pulled up and someone in a polyester plaid sports coat had got out.Imagery requires a consistency of style.

John from the pruning service came out the next Saturday. He lookedaround and quoted a fee of $1,000. As we talked, the price drifted downwardto $950 and then $850. My family had already retreated back to the houseunder the mistaken belief that bargaining is a tell-tale sign of a peasant lineage.

Feeling I was on a roll, I pressed on.John suddenly backtracked: “I don’t think I want to do the job for less than

$1,000.”“John,” I said, “you have a deal at $850. When can you start?”


Rising Sum

Usually, you keep bargaining to get something better than what you alreadyhave. John’s about-face maneuver was causing the price concessions to disap-pear altogether. Suddenly starting to breathe thin air, I readily agreed to $850,thanking my lucky stars that John was still willing to do the job for the “oldprice.”

In Instanbul, I was a four-time shopping award “winner.” Here’s how I didit. By entering a shop anytime before late morning, I was awarded a “first-customer-of-the-day” discount. For arriving late in the day, I was awarded the“last-customer” discount. And, in between, I was awarded “just-before-lunch”and “just-after-lunch” customer discounts. It didn’t matter whether I was shop-ping for a silk carpet, a custom-made suede suit for my wife, or a meerschaumpipe for dad. Just about every shopkeeper in the city has mastered this “buy-right-now-to-avoid-a-price-increase” disappearing concession tactic.

Hard-bargain tactics aren’t necessarily nice. Soft touch is about

using not-necessarily-nice tactics in a very nice way. Technique

is about making soft touching and hard bargaining compatible.

Your best defense against any hard-bargain tactic is your

ability to recognize it. Never assume that the other person has

your standards of conduct. They have their own rules. But then

they may have none at all.

121

C H A P T E R 20

Timing, Tempo, and

Turbocharging

Making Time Your Ally

Negotiating is a process, not an event. The difference between a

process and an event is time. Time can be your worst enemy or

your best ally.

Timing is not a formula. It’s a feeling.Every situation has a pulse.A “final offer” at 3 p.m. may not have much impact. Make that same offer

in a smoke-clogged, trash-filled negotiating room 12 hours and 20 cups of cof-fee later, at 3 a.m., and your persuasiveness quotient is considerably increased.

You don’t ask your employer for a raise on the day the firm loses its biggestaccount.

You don’t talk to a customer about extending your contract on a day whenyou have done nothing right for him.

A top-notch Beverly Hills real-estate broker refuses to show homes in themiddle of a summer day. She knows that with a bright sun overhead, swim-ming pools can look more blotchy than inviting.

Generally, Friday afternoons and month ends are stressful. Will this stressmean there will be more resistance to your proposal or less? Does the properpresentation of your proposal require a low-key and relaxed setting?


Automobile sellers, lenders, collection agents, and others who have to pre-pare month-end reports for higher management may feel a need to get yourdeal completed now.

Timing is about intuition. It is always a judgment call.Time is a force because circumstances and expectations change with time.

If you can’t reach an agreement today, under now circumstances, then try to-morrow, under later circumstances.

To make time an ally, you must learn the other person’s time constraints.There is probably no information easier to obtain. Usually, all it takes is onesimply question: “What is your time frame if we are to reach an agreement?”

Practice tip: It makes no sense to divulge your deadline unless that revelationwill work to your favor. If you are in doubt as to whether to answer, yourbest response may be, “I am not sure.”

Time Vampires

Have you ever noticed how labor disputes are most often resolved min-utes before present contracts expire?

Or how things get done more expediently if the seller or buyer or a lawyeron either side is going out of the country on business the next morning?

Or how you raced through negotiations because you had to be some-where else for an important meeting that you couldn’t be late for? How, inyour anxiety to “finish up,” you made concessions that you would not other-wise have made?

Deadlines are an acceleration device because they create a sense of immediacy.A sense of immediacy creates pressure. Pressure causes action to be taken. And,often, that action will be in the form of concessions given to meet the deadline.

Deadlines can be personal or external. You use personal deadlines whenyou tell the other person that your partner, who must also sign the papers, isgoing into the hospital for surgery tomorrow, or that your wife, whose name isalso on the deed, is leaving for Paris on Friday. If you tell the other person thedeal must be completed by year-end for tax purposes, you are tying yourcutoff date to an external deadline set by the IRS.

The closer and more specific the deadline, the greater the motivation forthe other person to take action. Negotiations must be completed by the 10th or wewill have no deal.

If you are not sure that a fixed time limit will properly serve your purpose,then a flexible deadline may be the order of the day. Negotiations must be con-cluded in the near future (or soon, or shortly) or we will have no deal.

The Out-of-Towner’s Deadline Ploy

A classic deadline ploy was sprung on me. I was in Costa Rica negotiatingfor some American business interests. Their project was the construction of a

Timing, Tempo, and Turbocharging 123

distillery that would convert cane into alcohol. On the night of my arrival, I wasinvited to a party at the home of the cane grower with whom I would benegotiating. In seemingly idle conversation, he asked how long I would be inSan José, the capital city, and I told him I would be leaving in three days.

It seemed that only I wanted to talk about cane availability, price, and terms.It was thrust and parry. No sooner would I initiate a business conversation thanhe would change the subject.

After two and one-half sun-drenched days filled with coffee plantations,the Mercado Central, country-club lunches, and city tours, he finally initiatedthe discussions that I had been waiting to pursue. He knew my deadline. I didnot know his. He also knew that:

• I had other commitments back in Los Angeles.• I would feel pressure to make concessions in order to take home

a deal.• Clients don’t like flying their lawyer to Costa Rica only to have

the lawyer come back empty-handed.Now, when out-of-towners visit me, I am always self-servingly polite enough

to ask when they will be returning home or whether I can assist them by havingmy secretary confirm their return flight.

The Short-Fuse Deadline Ploy

The person on the other end of the telephone was Joe, a collection agencypro. He was very brief and to the point. Yes, he would settle the claim againstmy client, a golf pro who had been out of the money too long, provided that Imade a satisfactory offer of compromise within the next three minutes. Whenmy time was up, he would hang up—even in midsentence—refuse any futurecalls, and proceed directly to suit. Tick. Tick. Tick.

Joe’s tactic was a short-fused, arbitrary deadline. I wondered how manypeople would use their precious time with Joe to make their on-bended-kneebest possible offers—offers that probably would never have been made if theyhadn’t been playing “beat the clock.” (Knowing that Joe’s ego wouldn’t allowhim to call me back, I told Joe I’d telephone the next day hoping he would bewilling to have a less-threatening dialogue. The following afternoon, the matterwas resolved to my client’s delight.)

Practice tip: Demanding immediate action without a stated reason may be anunwarranted use of horsepower. With Joe, I felt more alienated than moti-vated. Justifying your deadline will help maintain linkage and alignment. Ineed to know by 3 p.m. today whether we have a deal because....

The Evaporating-Offer Ploy

Whenever I think about “Linda” and “R&R Records,” I can’t help but thinkof those late-night slicer-dicer television commercials. You know the ones: youget steak knives as a free bonus, available for a “limited time only.”


Linda, a recording artist, was suing R&R in a down-and-dirty breach-of-contract dispute. The case was far from being a slam dunk for either party. R&Rmade several settlement offers to Linda who, wanting her day in court, refusedto settle.

When Linda rejected an offer of $215,000, R&R decided to try an evapo-rating opportunity offer: $225,000 if their offer to settle was accepted withinfive days, $210,000 if their offer was accepted within 10 days, $200,000 if theiroffer was accepted within 15 days, and $150,000 thereafter.

Time was marching on. Linda was being dragged right along with it. Linda’sopportunity to settle for $225,000 was evaporating before her very eyes.

Linda could give R&R’s proposal all the thought and consideration shewanted. Her indecisiveness, however, would cost her dearly—R&R had madeprocrastination unbearably expensive. Linda had to ask herself: Would more beaccomplished by continuing to negotiate than would be lost as the settlement offerstarted to evaporate?

As a society, we have a cultural bias in favor of fast foods and fast deals.Stop.Take a breath.Analyze your deadline before you race to meet it.Generally, deadlines are like the seasons. They come and go. Negotiations

seldom come to an abrupt halt at the stroke of midnight, and few arbitrary dead-lines are ever enforced. If the other person threatens to pull the deal, so be it.For every golden opportunity lost, you will save yourself from a dozen I nevershould have bummers.

There’s No Business Like Slow Business

Does the other person have interests that can be crippled by a standstill? Ifso, don’t make any moves. Orchestrate a deadlock. Let the deal collapse.

Put the burden for making a deal entirely on the other person.If the other person genuinely believes the deal is dying, their negotiating

limits may be revealed. Because any deal is better than no deal at all, the otherperson will, in effect, negotiate against themselves.

Is the other person anxious?Lightly brake, to discover why the other person seems to be in a rush.Is there a desperate need? A hidden deadline? Another deal pending that

is dependant upon an agreement with you being cut first?Putting the negotiations on the back burner will reveal the relative balance

of negotiating power.Light braking is calculated stalling:• Frank, a few questions have been raised by the City. I need

additional information from the architect.

Timing, Tempo, and Turbocharging 125

• Frank, I would like to continue our negotiations but I just won’tbe available for the next few days.

By slowing, but not stopping the momentum, Frank’s frustrations may wellbe translated into concessions.

The Great American Breakfast Tactic

Waffle!Pull out of the diamond lane.Drag your feet. As discussions get closer to a handshake, play on Frank’s

eagerness to finish up the negotiations. All of a sudden, the signed agreementthat Frank thought was just a breath away is really somewhere up the street.

• By the way, Frank, I forgot to mention that.• Oh, one small thing that needs to be dealt with, Frank.• Of course, Frank, I expect that.

Timing tactics are a negotiator’s braking and accelerating

devices. They govern whether negotiations will be on a fast

track, a slow track, or over on the sidelines.

P A R T IV

The Deal-Maker’s Playbook

Low-Impact, High-Yield Tips,

Tricks, and Tactics

The Deal-Maker’s Playbook is a unique action guide of hands-on, real-world how to and what to instructions. Use these tips and tactics to be amaster deal-maker in 36 common negotiating situations.

These step-by-step instructions do not need to be followed in their sug-gested sequence. They have been set out as a by-the-numbers progression soyou will be less likely to skip key points and will be more prepared to proceedmethodically rather than emotionally.

The Deal-Maker’s Playbook cannot and does not:• Raise every possible deal point or issue.• Have universal applicability—laws, industries, and community

customs vary.• Replace the need for the services of capable, knowledgeable

professionals. The right people will save you money up frontand aggravation later on.

129

Apartment Lease

Negotiating an Apartment Lease

As Miss America, my goal is to bring peace to the entire worldand then to get my own apartment.

—Jay Leno (parodying the beauty pageant).

Step 1. Make a Good First Impression

Dress and act like you’re being interviewed to win the right to live there!Landlords are more likely to grant concessions to people with whom they feelcomfortable.

Look like a slob and you will be perceived as a messy housekeeper.Be overly critical and you will be thought of as a complainer.Look down and out and no matter how much you paid for your painstak-

ingly tattered jeans, to the apartment owner or manager you may look as if youare unable to pay your rent.

Step 2. Lower Rent, or Something Else?

Put on your landlord’s negotiating hat—you know, the practical one yougot on sale. Of the following things a tenant may negotiate, which would you,as the landlord, prefer?

• Lower monthly rent.• Recarpeting the apartment.• One month’s free rent up front.

Free rent up-front is a risk. The tenant may be history by the second month.Lower monthly rent helps the tenant but does nothing for the landlord.

Besides, if existing tenants find out, it will be harder to renegotiate their leases.


The recarpeting is a win—win alternative. The landlord has improved theinvestment in the premises, and the tenant has gotten something in the bargain.

Maybe you can get all three. They’re worth negotiating for. But landlordsneed tenant harmony, and it might be disrupted with super deals for some andnot others. Landlords also need to improve the image and condition of theirunits, and to know a tenant will be a good renter before they agree to too manyextras.

Step 3. If It’s Not Chiseled in Granite, It’s Negotiable

Printed lease forms have not been handed down from the Mount andthere is no such thing as a “standard” form.

Standard is standard only for that landlord. Standard is standard only for anapartment owners’ association whose mission is serving its landlord members,or for a real-estate brokerage firm which, with a single form document, strugglesunsuccessfully to fully serve the best interests of both its landlord and tenantclients.

Standard is in the eyes of the beholder and is always negotiable.

Step 4. Consider Your Options

Negotiate one or more successive options to renew.In a tenant’s market, when rents are low, a landlord who hopes rents will

go up will want the renewal rent to be at rates in effect at the time of renewal.A tenant, however, will want to use a tenant’s market to negotiate and lock

in a fixed, low rent for the renewal term.But what if the landlord won’t lock in a fixed renewal rate?Ask for a share of the savings the landlord realizes when you renew. When

a tenant renews, the landlord does not have to pay a Realtor’s commission tofind a new tenant (although the original broker may get a commission on therenewal). He or she has no dead time before finding a new tenant, does nothave to give “free” or concession rent inducements, and does not have topaint, recarpet, or make tenant improvements to lure a new tenant.

If the landlord insists that the renewal rent must be the rate in effect at thetime of renewal, negotiate for a statement that the rate will be less commissionssaved, less the value of rent concessions being given others in the building atthat time, and less the then-average cost of the landlord’s new-tenant restora-tion and repair improvements.

Step 5. Build in an Escape Hatch

Change is the only constant. People are transferred by their employers,lose their jobs, find the house of their dreams, drop out of school, divorce,become ill, marry and move on, suffer business failure.

Apartment Lease 131

Thus, negotiating a right of early termination may make a lot of sense. Forexample:

• The right to leave after three months if you pay a penalty equalto one month’s rent.

• The right to leave if you give six months’ advance notice.• The right to terminate if you lose your job, you become

disabled, your business fails, and so on.

Step 6. Negotiate a Right of Change

Negotiate the right to move, during the lease term, to a larger unit in thebuilding—or to a smaller unit; or to a unit with a better view; or to a unit on ahigher floor; or to a quieter unit—when it becomes available.

The reason your broker never told you about early termination or apart-ment change provisions is because brokerage commissions are paid up frontand are based on what is locked-in and certain. Rights of termination or changeput the scope and duration of your lease in doubt.

Step 7. Managers Are as Good as Their Word—

As Long as It’s in Writing

Leasing agents and apartment managers change, buildings are sold, memo-ries fade. If you are promised anything—a repainted wall, a new garbage dis-posal unit, whatever—get that promise in writing.

132

Appliances

Negotiating Major Purchases:

The TV/Treadmill/Tires/Computer/

Refrigerator/Stereo Game

Step 1. Make a Salesperson Invest in You

Get your salesperson to invest time in you, the customer.How can you cause that investment to be made? Ask questions. Compare the

various models available—warranties, colors, finishes, specs, features, sizes, easeof operation, style, price, special incenitives—whatever it takes.

What is the worst that can happen? You will know a lot more about what youare doing than when you started.

And the best...? It is a behavioral truth: the more time invested in you by thedealer, the more likely that concessions will be granted to make a deal.

Step 2. Don’t Be Swayed by Printed Prices

Tire stores, appliance stores, and computer retailers are just a few mer-chants that use printed price lists as marketing tools. These lists may show themanufacturer’s suggested retail or wholesale price, or both.

Whenever you are being shown a printed price list, wholesale will seldombe the dealer’s true cost, and manufacturer’s suggested retail is a selling aid, not areflection of worth.

Printed price lists are almost always designed to set arbitrarily high prices sodiscounts from those prices appear generous. This discourages any bargaining.Instead of being discouraged, counter with Step 3.

Step 3. Ask “What Is Your Best Price?”

and Anticipate the Response

The treadmill I was interested in was advertised by a national chain offitness equipment stores at a weekend special price of $3,395.

Appliances 133

The dialogue I had with Tracy was typical:

Bob: Does this store have a competitive-price policy?Tracy: If we didn’t, we couldn’t stay in business.

The stage had been set. It had been acknowledged that the price was notset in stone.

Bob: If at all possible, I prefer not to do comparative shopping. What is yourbest price?Tracy: $3,200.Bob: If $3,200 is your best price, I guess I will have to look around.Tracy: If you can show me this item advertised for less, we will match theprice.Bob: What is the least amount you or this store has sold this treadmill for?Tracy: Well. Ugh. Well, to be honest with you, $3,100.Bob: If I buy this treadmill for $3,100, will you write on the receipt that youhaven’t sold it for less than $3,100?Tracy: That’s not fair.Bob: What is the reason it’s not fair?Tracy: OK. I will tell. I sold one for $3,000.Bob: Did that include free delivery and installation?Tracy: Yes, but we usually charge extra for that.Bob: Are you saying you will sell it for $3,000 including delivery and instal-lation?Tracy: Yes. But that is the best I can do.Bob: Who in the store is authorized to sell it for less than that?Tracy: The manager.

The manager has been brought over at my suggestion.

Bob: Hi. Tracy has been very helpful but she says you’re the person to talkto. I’m trying to avoid a lot of comparison shopping and would like to dobusiness with your store. But Tracy says only you can authorize a pricebelow $3,000.Manager: I really can’t go below $3,000.Bob: Tracy said I need a $75 carpet board to go under the treadmill and Iknow an extended warranty is $100. Can those be included in the price?Manager: Okay, if you buy today.

Step 4. Pave the Way for a Graceful Retreat

Business is not great every day.A merchant’s cash needs are never constant.


Managers in various stores of the same chain are in competition with eachother.

Often, a merchant will be willing to sell to you for less but has no room togracefully retreat from a fixed-price policy or from the discount that has alreadybeen offered.

Many dealers will sell anything on the showroom floor—yes, even if it hasbeen there all of five minutes—as a “demo.” It’s a face-saving way of circumvent-ing their own nondiscount policies.

Here are other face-saving deal-clinchers:I know this is a fixed-price store and you don’t discount. However—• you don’t have your normal large selection of colors and models to

choose from.• you are unable to deliver immediately and, because you are back-

ordered, you won’t be able to deliver for three weeks.• the merchandise is not in perfect condition [or is shop-worn, or is

scratched]. It looks as if it should be priced as a demo.

Step 5. And One for the Road

What is the discount if I pay cash?

135

Automobile Lease

Driving a Hard Bargain

Sometimes lease can be more. But sometimes you can’t win for leasing.

Step 1. To Buy or Not to Buy?

Gone are the days when leasing was an option reserved for doctors, law-yers, and businesspeople who could deduct part of their lease payments asbusiness expenses.

Leasing now makes sense if you want to drive a new car and lack themoney for a down payment or costly monthly loan payments.

If you keep a car more than three or four years, drive more than 12,000 to15,000 miles a year, or are rough on a car, then leasing may not be for you.Remember, no matter how good it sounds, leasing is just a long-term rental,and at the end you own nothing whatsoever.

Step 2. Consider the Leasing Company

Generally, you will do better leasing from a new car dealer than from anindependent leasing company. To roll out excess stock on certain models, manu-facturers will often give special incentives to their leasing divisions, which inturn offer attractive lease deals to drivers.

Step 3. Understand That Low Payments Are the Bait

Don’t be a “payment buyer” who looks only at the monthly paymentamounts. You can be offered what you think is a great deal only to find out laterthat you way overpaid.

Leasing involves four pivotal dynamics:


a. The price (capitalized cost) of the vehicle when the leasecommences.

b. The used vehicle (residual) value when the lease ends.c. The amount of the down payment (capitalization reduction

payment, or CRP).d. The term of the lease.

Assume the car you are leasing for 24 months has a price of $25,000.There is a $2,500 CRP. The residual value is $10,000.

By leasing, you are depreciating or “using up” $15,000 in value ($25,000price less $10,000 residual value).

The $2,500 down payment is part payment for the value you are using.There is still $12,500 of value ($15,000 less $2,500) for which you will have topay. This $12,500 of value along with the leasing company’s cost of money,taxes, overhead, and profit divided by 24, will be your monthly lease payment.

Step 4. Negotiate a Selling Price

If you are leasing through a dealership, negotiate the car’s price and yourtrade-in allowance before disclosing you are a leasing prospect. If asked whetheryou are interested in buying or leasing, don’t tip your hand. Respond, “I amthinking about buying.”

The selling price will almost always be less than the sticker price ormanufacturer’s suggested retail price (MSRP). (To get a bargain selling price,review the negotiating tips in the next Playbook section, “Automobile—New.”)

The lease capitalization cost generally should never be more than 5 percentabove the amount for which you could purchase the vehicle.

Step 5. Negotiate the Residual Value

There are two primary types of leases: open-ended and closed-ended.With an open-ended lease, you are speculating on the vehicle’s residual value—

what it will be worth at the end of the lease term. If this residual value is higherthan expected you will get money back. If it is less than its projected value, youwill be stuck paying money to the leasing company.

Chances are you will be negotiating a closed-ended lease: both you and thelessor are committed to a fixed sum—the forecasted residual value that younegotiate.

Why negotiate the residual value? Vehicles selling for the same price may havedramatically different residual values. Think about this: A car that sells for $28,000may be cheaper to lease than a car selling for $25,000.

Why? Assume the expensive car has a residual value of $16,000 and theless expensive car has a residual value of $12,000.

Automobile Lease 137

Price $28,000 $25,000Residual value –16,000 –12,000Value used by driver $12,000 $13,000(to be paid to leasing company)

Tip: You can determine the residual value yourself by looking at the refer-ence book Automotive Lease Guide.

Step 6. Negotiate the Down Payment (CRP)

It’s a lessor’s worst nightmare: a low-money down payment followed bythe customer’s defaulting a few months later. The leasing company is stuck withwhat is now a used vehicle.

The CRP protects the leasing company by cushioning its loss exposure ifthe lease is prematurely terminated. The amount of the CRP will, in large part,depend on your creditworthiness.

Leasing companies encourage large CRPs by telling customers, “The larger theCRP, the lower your lease payments.” A CRP payment, however, doesn’t havethe same tax deductibility potential as a monthly lease payment, and business usersshould consult with a tax professional in regard to the amount of the CRP.

Step 7. Negotiate a Deal That Includes a Low Rate for

Additional Miles

A closed-ended residual value is based on the assumption that you will notdrive more than a certain number of miles during the lease term—usually, about12,000 to 15,000 miles per year times the number of years in the lease.

To compensate for the unanticipated wear and tear associated with greatermileage, leases typically provide that mileage in excess of a negotiated number ofmiles is surcharged by the mile (about 10 to 15 cents per mile). Negotiate morenoncompensable miles and a lower per-mile rate for compensable miles.

Step 8. Negotiate Excess-Wear Provisions

Somewhere in the contract there will be provisions about your obligation ifthe car is returned with “abnormal damage” or “excessive wear and tear.” Theseare hard terms to define. Negotiate lease provisions that are as specific as pos-sible. What exactly will happen if you bring back the car with a ding in the door,a stain on the front seat, or bad brakes?

Step 9. Negotiate a Way Out: Escapes and Transfers

You can’t unload a leased vehicle as you would an owned vehicle. There-fore, be sure to negotiate the following in advance:


• The amount charged if you terminate the lease at various points intime. On a two-year lease, the cost of returning the car at the endof one year will be different from the cost of returning it at theend of 18 months.

Leasing companies calculate unearned lease charges in anumber of ways (sum-of-the-digits; rule of 78s; net present value;or actuarial method minus any surpluses). In one survey of 10leasing companies, the cost of terminating a four-year lease of aparticular model at the end of one year ranged from $10,998 to$2,151. Number crunchers recommend negotiating an “actuarialmethod minus surplus.”

• The ability to transfer your lease to someone else. Some leasingcompanies will not allow a lease assignment or transfer even thoughyou remain responsible in the event your successor fails to makepayments.

Step 10. Negotiate a Lease-Extension Option

It can happen. You may love that trouble-free, incredibly dependable carand want to extend the lease term. Negotiate lease extension terms prior to thecommencement of the original lease.

Step 11. Negotiate a Right of Purchase

At the end of the lease, you may want to buy the vehicle for yourself or amember of your family. It is important to negotiate an option price when youlease, in the event you later decide to purchase the car outright.

The purchase option price should be the lesser of the residual value or the“true value” at the end of the term. True value could be Blue Book wholesale.Because residual value is nothing more than a projection, it is possible that BlueBook wholesale will be less than the residual value.

Step 12. Negotiate Gap Insurance

If the vehicle is stolen or if you have an accident early into the lease and thevehicle is totaled, there will most likely be a big difference between what theinsurance company will pay and what you have to pay the leasing company. Gapinsurance should not be expensive—a couple hundred dollars over the term ofthe lease—but negotiate to have it included at no charge as a part of the deal.

Step 13. Loaners and Lemons

Be sure that the leasing company will provide you with a loaner if your carspends time in the shop, or will replace it if it turns out to be a lemon.

In many states, leased cars aren’t covered by the “lemon laws.” In thosestates, negotiate what constitutes a lemon. For example, if the car is out of

Automobile Lease 139

service for repairs more than 30 days within the first year or 12,000 miles, itwill be deemed a “lemon” and the dealer will have to replace it with a compa-rable new car for the balance of the lease term.

Step 14. Be on the Alert for End-of-Lease Fees

There is no reason to pay a disposition fee or lease termination fee if youkeep the car the whole term. As often as not, these fees are a marketing gim-mick. The leasing company will later agree to “forgive” them if you lease an-other car or buy the car you have been leasing.

Step 15. Read the Fine Print

The fine print may tell a very different story than the headlines in the ads.Don’t be pressured into signing on the spot. Take the contract home and lookit over carefully. It will be lengthy and it won’t be exciting, but reading the fineprint is a must. If the lessor’s promise isn’t in writing, it isn’t worth anything.

Tips a la Carte

Alert: Car dealers routinely “bump” the interest rate quoted by the leas-ing company to the dealer. That bump is extra dealer profit. Ne-gotiate away the bump.

• Ask the dealer if they work with other leasing companies thatmight offer better terms. Tip: Check online services such aswww.LeaseCompare.com.

• Pick up a blank contract form from the dealer before you intendto lease and take the time to examine it. Seeing a contract for thefirst time while sitting in the dealership is not the time to studythe contract. Alert: The Federal Consumer Leasing Act requiresthat certain key information and figures are disclosed in everylease contract. The Act does not regulate the actual dollar amountthe dealer discloses, only that a dollar amount is disclosed.

www.LeaseCompare.com

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Automobile—New

How to Make Your Best New Car Deal Ever

Frankly, I am getting a little weary of making great new-car deals for all ofmy friends and relatives. So, folks, here they are: my secrets for getting a greatdeal on your next new car.

Step 1. Know What You Want

Take test drives. Look at the color charts. Learn what is standard in variousmodels, what is offered as a package, and what is optional. Only then decidethe exact make, model, equipment, and color you want.

Step 2. Head to the Bookstore

Books listing the dealer’s base cost (“invoice”) for every car as well as thedealer’s cost for each piece of optional equipment are readily available in mostbookstores and online. Tip: Consumer Reports Auto Price Service(www.consumerreports.com) and Edmunds.com list all current invoice costs,holdbacks, cash rebate offers, and factory-to-dealer incentives.

Practice tip: Yes, what you have always heard is true. You will do betterbuying a car just before month-end sales reports are due.

Generally, the best time of year to buy is in September and October (at theend of the model year if the dealer has a large inventory and needs to makeroom for next year’s models) and December when dealers want to reduceinventory taxes and give a last minute boost to annual sales.

Negotiating alert: What about “no-haggle” discount dealerships? Professionalshoppers report you will do better bargaining with a “traditional” dealershipif you know how to play the game.

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140

www.consumerreports.com

Automobile—New 141

Step 3. Try to Go Fleet

When you are unequivocally ready to buy, telephone a dealer and ask forthe fleet sales department. Introduce yourself and indicate the model, equip-ment, and color you are interested in buying.

Why fleet? A fleet sale avoids a showroom salesperson’s commission, mak-ing it possible to cut a closer deal.

Why would the fleet department sell to you? First, as a separate profit centerwithin the dealership, it must maintain a profitable sales volume. Second, thefleet people like winning sales contest prizes.

Can you ask for a test drive and generally take up the fleet department’s timeasking zillions of questions? Generally, it’s best to know in advance what youwant. Think of the fleet people as no-frills order takers. Period.

If you are buying fleet, try not to visit the fleet salesperson until you havemade your telephonic deal and are ready to write a check. A premature visitwill take away the essential auction/bid character of your negotiations.

Although you will always do better through the fleet department, somedealerships either will not have a fleet department or will redirect you to retail sales.

If you have been talking with a retail salesperson, the fleet department ofthat same dealership will probably redirect you back to that salesperson.

In either event, fleet or retail, the steps are the same.

Step 4. Ask About Invoice Cost, Incentives, and Holdbacks

Unless you know what the dealer’s actual cost for the car you’re interestedin, you don’t know how much room there is for negotiating. The dealer’sactual cost is its invoice cost less factory-to-dealer incentive rebates and holdbacks.

• Ask about the dealer’s invoice cost of the car. This is not the dealer’sactual cost but the dealer’s base purchase price from the factory.

• NEVER EVER go to the dealer without a copy of the invoiceprices of the vehicle you want. And never let the dealer tell youyour source of invoice pricing is wrong.

• Ask about factory incentives for dealers. Although the dealer hasthe option of pocketing these rebates they do lower the dealer’scost below invoice, encouraging and enabling the dealer to sellcars more cheaply. If the salesperson is vague with her or hisanswer, insist she or he find out and tell you. If an answer isrefused tell them you will find a different dealer.

• Ask about dealer holdback. Many manufacturers give the dealer afurther quarterly rebate based on the price of the car. This hold-back also reduces the dealer’s actual cost. Holdback rebates todealers generally range from 2 percent of base invoice to 3 per-cent of the total sticker price.


Step 5. Ask the Dealer to Bid the Car

Asking the dealer to bid is asking the dealer to propose a selling price. Youwill want the bid to be expressed as dollars above or below dealer’s invoice (“We willsell any XL model in inventory, for $200 over invoice”). A pro will negotiatefrom that figure rather than from the sticker price.

The word bid puts the dealer on notice that you will be shopping around.It creates the important psychological aura of a pseudo-auction, thereby prompt-ing a lower price from the dealer.

Remember, incentive rebates and holdbacks may make it possible for adealer to sell to customers profitably at, or even below, invoice.

A bid that is dollars above or below dealer’s invoice establishes a negotiatingcommonality. The invoice price of similarly equipped cars will be the same at thecity’s dealerships. Actual cost may vary among dealers because some incentiveswill be tied to a dealer’s sales volume.

Step 6. Clarify the Bid Price

Have the bid exclude add-ons that are not on the factory window sticker.These are strictly for the unwary. By discounting the padding, dealer discountsappear greater than they really are. Some common add-on bargaining traps are:

• “Dealer preparation” charges for waxing, paint sealing, rustproofing, and fabric spraying. These are expensive, high mark-up dealer extras.

• ADP (added dealer profit), ADM (added dealer mark-up), andAMV (added market value).

• Conveyance fees charged for paperwork.

If you are negotiating for a cash-back deal, proceed as if there was no factory-to-customer cash rebate. When you have agreed on a price then deduct thecash-back offer.

Ask about factory incentives for customers. One manufacturer, for example,offers recent college graduates a $300 incentive discount.

Step 7. Play on the Power of Competition

Now is not the time to bargain because you want to play on the power ofa pseudo-auction. Tell the dealer you want to make a few calls to other dealersand you will call back.

When you make calls to other dealers, solicit their bids expressed as dollarsabove or below the dealer’s invoice.

Once you know the exact model, color, and equipment you want, it maybe both more effective and convenient to send a fax to the dealers in yourarea asking them to submit their best deal by return fax. Call back the dealerwho made the best bid, confirm the exact selling price of the specific car youwant, and ask, “How much flexibility is there if we close our deal today?”

Automobile—New 143

What is a good price? Usually, about $150 to $300 above the dealer’s invoiceis a reasonable bargaining goal. You will probably pay more if you are eyeing ahot new model and are asked to take a number as you enter the showroom. Ifyour model choice is a slow seller or the factory will soon announce stylingchanges to that model, then paying invoice or less is a reasonable goal.

Step 8. Negotiate the Value of Your Trade-In

Check out the value of your old car if you think you might be trading it ininstead of selling it yourself. This information can be found at your library, localbookstore, or in the used-car valuation bible, Kelley’s Blue Book, (www.kbb.com).

NEVER EVER go to the dealer without knowing what your trade-in isworth. Until the price of the new car is established, don’t get into trade-indiscussions. This helps keep negotiations simple. Besides, you don’t want tolose the benefit of a bargain on the new car by getting a low price for yourtrade. If asked, say you aren’t sure of your plans for the old wheels.

Step 9. Negotiate a Great Car Loan

To get the best available loan, start with your credit score. In the monthsbefore you go car shopping, improve it as much as you can. The better yourscore, the better the loan terms you will be able to negotiate.

With an improved score, now is the time to go online to do some loanshopping. You won’t need to know the model or price of the car you have inmind. Capital One Financial and E-Loan are among the online lenders who willprocess your application, offer an interest rate, agree loaning you up to a spe-cific amount, and send you blank check that you can give to the dealer. You areunder no obligation to use the blank check.

Check the rate to you can get from your local bank, credit union, GMAC,Ford Motor Credit, and other lenders.

You’re now ready to deal with a dealer. Now is not the time to tell thedealer what monthly payments you can afford. Instead, see what terms thedealer offers.

On the street they are referred to as “captive finance companies.” Theseare the lenders to whom the dealer owes money. If the loan the dealer isoffering is through a captive, it may not be the most competitive loan you cannegotiate. Compare the dealer’s rate to what you’ve found elsewhere.

If you’ve found a better rate, show what you’ve found to see if the dealerwill beat that rate. Alert: If the loan you found is better than what the dealer isoffering, make sure the dealer doesn’t tack on new charges to make up forlosing your financing business.

Step 10. Negotiate the Extended-Warranty Premium

Are you going to buy an extended warranty?

www.kbb.com


The dealer would prefer to sell you an “insurance company” warrantyrather than a manufacturer’s warranty. The profit margin is greater. Most insur-ance company warranties are filled with escape clauses and oppressive condi-tions regarding when and where routine service is performed.

Your cost for either warranty is negotiable. An extended warranty does notneed to be purchased the day you buy the car nor does it need to be purchasedfrom the dealer who sold you the car.

AVOID DEALER GAME-PLAYING

NEVER EVER let the salesperson play games with you. Ask them to stop.If you still feel intimidated, tired, pressured, or confused, you’re doomed. Ifyou’re not comfortable with a salesperson, ask for another, or leave.

ALWAYS give yourself the option of walking out if the negotiations aren’tgoing your way. And don’t accept the dealer’s offer to take the car home over-night while you think it over. That offer is made to add to your pressure tomake a deal.

Showroom game-playing usually starts with your being asked the sucker-punch question: “What would you be willing to pay for this car?” Ask for thedealer’s bid instead.

What if the friendly folks in the showroom aren’t friendly enough to bid in termsof cost-above-invoice? You are left with two easy choices.

Choice No. One: Stand firm, letting them know you will do some shoppingaround. My bet is they will respond with one of the following lines:

• How much do I have to discount this car to get you to buy right now?(Respond with a question of your own: What is the least amountthis dealership has sold this car for?)

• We will quote a price after you have visited the competition. (Refuseto shop around. On your return, they will ask about the bestdeal offered.)

Choice No. Two: Offer “$150 over actual cost,” then stand back and watch thesalesperson scurry off to a “take-over” manager for further instruction.

Practice tip: After negotiations are concluded, verify the invoice price byasking to see the invoice. If the dealer has been candid, the invoice will beshown to you.

If the dealer refuses to show you the invoice, fall back on the Pinocchio Test.Insist that the dealer must write on the final contract: Dealer represents that thepurchase price of this car is $________ over (or under) dealer’s invoice.

A few years back, I purchased a car and the dealer made this written repre-sentation. Months later, I found out I had been misled. When confronted, thedealer promptly wrote a check for the difference.

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Automobile—Used

Negotiating the Purchase of a Used Car

When you purchase a car from a dealer, you are dealing with sales pros.Buy a used car from a private party, and you must contend with the seller’semotional and personality makeup.

A new car that you like can be found at dealerships all over the county.Finding just the right used car is a matter of luck. Buying that used car at theright price may mean overcoming the seller’s misconception of worth.

Let’s start with a scenario illustrating the used-car game.The ad was in the Saturday classifieds. You follow the directions given to

you over the phone. And there it is! The Mustang that you want to buy isparked right before your very eyes.

You play it cool. You’re not overly enthusiastic. You never give the car’sowner the impression you are a slam-dunk buyer.

Despite all of this, the price is way too high.You have looked at Mustangs for three weekends and you don’t want to

lose this opportunity. But then you don’t want to play positional my price vs.your price hardball with some amateur who may tell you to take a hike.

Wisely, you opt for an oblique run—a nonpositional approach.

You: I feel that the $11,000 you are asking for the car is awfully high.Seller: I saw some ads in the Sunday classifieds, so I know the going pricefor this model and year.You: You used the paper as a guide to determine fair-market value?Seller: Yep.

Your tactics have succeeded: The seller has acknowledged that he is inter-ested in selling his car at its fair-market value. The seller’s reason for asking


$11,000 is his belief that $11,000 is fair. The classified ads were only a guide inmaking this determination.

You: I have been looking at those ads too, and I saw some where the askingprice is a lot less. Do you think we can find some criterion of fair marketother than the classifieds?

You have suggested to the seller that ads were chosen selectively to sup-port his price position and that there is usually a big difference between news-paper asking prices and selling prices. The seller has agreed to sell the Mustangfor its true fair-market value, but there is a worth conflict: What is really the fair-market value?

Seller: What do you have in mind?You: Well, the Kelley Blue Book is the used-car pricing bible. I will pay whole-sale Kelley Blue Book.Seller: I agree that the Blue Book is the bible. But I am a retail seller and Iwant a retail price.

You and the seller have acknowledged a credible external criterion, KelleyBlue Book value. But there is still the issue of whether wholesale or retail book isapplicable.

You: Retail Blue Book is usually what is charged by a dealer who is willing toguarantee a car’s condition and who would assist in arranging financing andtransfer of title. What about a price that is halfway between wholesale andretail Blue Book?

You are offering the seller a basis of compromise that will be transformedinto dollars. Offering money before the basis of compromise is accepted willcause the seller to become more position-oriented.

You offered the seller an eternal standard (the Blue Book) and an objectiveapproach (the 50/50 split). Both contribute to resolving whether wholesale orretail book should apply.

Here are the steps for using this externalization tactic:

Step 1. Get the Seller’s Reasoning for the Position Taken

The $11,000 asking price was, in the seller’s mind, fair-market value.

Step 2. Have the Seller Explain Why That Position Is

Considered Fair

The classified ads were the seller’s benchmark of fairness.

Step 3. Confirm That the Seller Is Interested in True

Fairness

The seller confirmed an intention to sell the Mustang for its true fair-marketvalue.

Bargaining and Haggling 147

Step 4. Show Why the Basis for the Position Is Unfair or

Biased

Selected classified ad prices are unreliable determinants of value. Unlike theseller, retailers offer warranties and other benefits to justify a top-dollar price.

Step 5. Suggest Seeking a Mutually Acceptable Fair

Standard

Kelley Blue Book value is the agreed upon choice.

Step 6. Convert the Mutually Agreed-On External Criterion

to “Price”

A price halfway between wholesale and retail Blue Book should be workable.

Practice alert: Beware of a practice known as curbstoning. A person selling acar through the classifieds may be a front for a used-car dealer. Ask: Who isthe title owner? How long have you owned the car?

In many states, a vehicle’s chain of title, showing historical ownership, isavailable from the Department of Motor Vehicles.

Professional shoppers report you will do better bargaining with a “tradi-tional” dealership if you know how to play the game.

Tips a la Carte

• Ideally, you want to meet the car’s principal drivers to see if theystrike you as being responsible people. Be wary of the car that hasbeen driven primarily by a teenager.

• Determine how the car was used. Stop-and-go use is a lot rougheron a car than freeway miles.

• Was the car in an accident? If so, what repairs were done andwhat was the repair cost? What shop did the work? Alert: If thecar has been in a serious accident, crucial components, such asthe frame, may be irreparably damaged.

• Ask to see service records. A well-maintained car will have beenserviced at the manufacturer’s specified service intervals.

• Look at the first registration date in the car’s history report tosee the actual age of the car. The car’s year is a model year, nota production year. A 2005 car may have been produced inmid-2004.

148

Bargaining and Haggling

The Bazaar/Marketplace/Swap Meet/

Street Vendor/Shopping Game

This section is not about chiseling.It is about being at the top of your bargaining game and is the result of my

having interviewed more than 200 merchants on six continents, gatheringbargaining and haggling tips for shoppers headed for art fairs, flea markets,swap meets, and bazaars around the world.

These are the secrets I have shared in lectures to cruise ship passengersover the years. I have watched those passengers in action, and their resultshave been incredible.

From Si to Shining Si

A peasant lineage isn’t a prerequisite to becoming a top-seeded shopper.The secrets of success are pretty much the same whether you bargain for

brass Buddhas in Bangkok, an amber necklace in Kenya, reindeer gloves inHelsinki’s dockside market, or earrings on Berkeley’s Telegraph Avenue.

Step 1. Engage in Bargaining Foreplay

Bargaining foreplay is the difference between a great deal and an ordinary one.Cairo’s Khan Al Khalili Bazaar has local color you can cut with a knife. As

he watched me scan his ware a stall owner observed my body signals. Whenmy eyes and hands momentarily came to rest on a mosaic box, he made hismove. I should have known better than to show interest in any particular item.

The key to the credibility of a low I don’t care if I buy it or not offer isappearing not to be too anxious.

Here are a few of the comments I have heard made by shoppers who lostall bargaining credibility by not understanding the importance of bargainingforeplay. Do any of them sound familiar?

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148


• Wouldn’t this look great in the family room?• I saw a necklace just like this at Saks for 10 times as much.• This is just what Jim and Alice told us to bring them back.• Wouldn’t this look great with my turquoise outfit?

Step 2. Nothing Ventured, Nothing Discounted

Watch other shoppers in action.Pay particular interest to the spread between initial asking prices and the

amounts actually paid. Ask other shoppers what they paid for things that are ofinterest to you.

Then make an extremely low offer.A representative from the Indian tourist bureau told fellow cruise passen-

gers sailing to Bombay that “a shrewd shopper’s opening offer should be 50percent of the asking price.” The speaker knew that most Americans are toomoderate, too “polite” to ever offer less than 50 percent.

But, in Bombay, as in many other places in the world, many of our 80percent and 90 percent discount offers were accepted.

Okay, maybe your extremely low offer won’t be accepted. But you havedone the groundwork for driving home the best possible bargain because yourlow offer has impacted the seller’s expectations and price goal.

Step 3. Build a Budget Ceiling

Your low offer is the seller’s cue to extol the virtues of the goods. Onceyou let value or worth come into play, you will hear about the untold hoursspent weaving, carving, or painting the object you have admired. Instead ofquestioning worth, I build a budget ceiling, knowing that my budget, unlike worth,is a figure so personal it can’t rationally be disputed.

A budget ceiling can be your own or someone else’s. Bargaining in off-the-beaten-track native markets throughout the world, I will tell a vendor in St.Petersburg, Acapulco, or Rhodes that I am shopping not for myself but for a(fictitious) neighbor back home who asked me to bring back a necklace, serape,or carving but not to spend a ruble, peso, or drachma more than….

The amount specifically “authorized” by the fictional neighbor will, of course,be a fraction of the asking price.

An imaginary neighbor’s budget, rather than worth, becomes my irrefutablefixed ceiling. This tactic, which allows the vendor to save face while retreatingfrom an announced position, works almost everywhere almost every time.

Step 4. Test the Bottom

My bargaining credo is simple: There is no such things as a final offer, a bestprice, or an arbitrary purchase deadline.


• This special price is available only if you buy now. Don’t be swayed bya disappearing discount. Disappearing discounts always miracu-lously reappear.

• But I am already offering it to you at my cost. Once I reach what Ithink is a rock-bottom price, it is time to test that bottom: Howmuch of a discount would there be if I bought two? Or three? AlthoughI may intend to buy only one, the dropping price point gives mea better feel for the seller’s flexibility.

The bottom may not be the absolute bottom. Ask:• What is the discount offered if I buy with cash instead of a credit card?• What is the discount if I use U.S. currency instead of the local currency?

Practice tip: The question What is the discount if...? presupposes a discount. Thequestion Is there a discount if...? makes it all too easy for the seller to say no.

Step 5. Increase Your Offer

If necessary, quote a higher price. Bargaining is expected. Failing to counteris impolite in some cultures. Keep your increased offer below the anticipatedclosing price. Remember the secrets in Chapter 17. Posture yourself for a “let’s-split-the-difference” offer.

Step 6. Make It Clear That You Are Prepared to Walk

Chances are you won’t have to walk very far.

Step 7. Exotic Aisles: Bargaining Traps

• Please sit and have a little tea. Store owners in many parts of theworld will invite you to sit and have tea with them. An experi-ence to write home about? More likely a personalization tactic.Personalizing the negotiating process makes it harder for you toturn down their offer.

• Recall the anecdote about Barbara and the velvet painting, inChapter 19. Avoid being swept up in the back-and-forth of bar-gaining. Getting the best possible price isn’t great bargaining. Greatbargaining is getting something you want at the best possible price.

• Remember, somebody is buying what the apprentices are mak-ing. Be alert to the possibility that what you see is not necessarilywhat you get. To avoid switches, never allow your purchase to beout of your watchful sight.

• Except in the very finest stores, don’t trust shopkeepers’ descrip-tion of age or quality. Never buy anything important from side-walk vendors.


• If your tour guide takes you to a store or factory, it’s not becausethe best merchandise is sold there at the fairest prices, it’s becausethe guide is getting a commission. (Those colored stick-on dotstour guides ask you to wear tell the cashiers which guide receivesthe commission for your purchase.) “Factory” prices are not whole-sale prices, and the quality is not always the best.

• Don’t assume that store signs proclaiming “Factory Outlet” or “DutyFree” are anything other than come-ons.

• Did you get the right change? Was it in the right country’s cur-rency? Was it in the currency in use now? Sleight-of-hand whenreturning change is not uncommon in Third World countries.

• Street merchants and marketplaces often sell “seconds” and re-jects. Examine merchandise (including fabrics and clothing items)from top to bottom, corner to corner.

• Wanna buy a watch? Beware of fake designer goods in all but luxuryand department stores.

152

Business—Purchase

Negotiating the “No Surprises Later On”

Purchase of a Business

Step 1. Ask Yourself...

Before you buy a going business, make sure you understand the prospectsof this business, at this location, in this condition.

• Is a national competitor starting to dominate the market? Manyindependent merchants are being pushed aside by “category kill-ers” such as Staples, Foot Locker, and The Home Depot.

• Is new competition around the corner? Stores “on the avenue”are losing customers to malls that offer security and easy parking.

• Is it a trendy business whose time is over? Cookie and yogurtstores were hot for a while, but are now in a fade. Every fad willultimately suffer the same fate.

• Is it a business impacted by changing health concerns? High-fatfoods and tanning salons are falling from favor.

• Is it a business dependent on an anchor or neighboring businessto generate traffic? Anchor tenants don’t stay forever.

Step 2. Lock in Your Expectations

Ask yourself: Why am I buying this business? Am I getting what I think I’m getting?Warranties are written guarantees that certain representations made by the

seller are true.Common seller’s warranties to negotiate are:• Financial statements are complete, correct, prepared in accordance

with generally accepted accounting principles, and fairly representthe financial condition of the business.

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152

Business—Purchase 153

• Since the date of the financial statements, there have been noadverse changes, financial or otherwise, in the business’s opera-tions, properties, or prospects.

• Accounts receivable are genuine, valid, good, and collectible.• Inventory items are current and salable except for those items

specifically scheduled as obsolete or slow moving (“carve outs”).• Customer lists are accurate. There are no disputes with any cus-

tomers nor do any of the customers intend to cease doing businessor substantially decrease the volume of business they are doing.

• Fixtures and equipment are in good working condition and repair.Consider: What representations must you have in order to maximize your

comfort level with the deal? Negotiate to have all important representations setout in your agreement as warranties.

Step 3. Negotiate the Scope of the Seller’s Warranties

Warranties can be absolute. For example: All accounts receivable are collectible.Warranties can also be limited to what the seller knows. For example: To the

seller’s knowledge, all accounts receivable are collectible.Suppose a large account receivable is uncollectible because a customer has

filed bankruptcy. Your seller hadn’t received notice of the bankruptcy at thetime you bought the business.

If the seller’s warranty is absolute, the seller would be obligated to indemnifyyou for what you lost. The warranty is unequivocal.

If, however, the warranty is limited to the seller’s knowledge, you wouldhave no claim because the warranty is conditional on the seller’s having knownabout the bankruptcy.

• Negotiate absolute warranties rather than being put to the taskof proving what the seller may or may not have known.

• Negotiate that the warranties will not be affected or limited byany preclosing investigations made by you or someone else onyour behalf.

• Negotiate that the representations and warranties contained inthe agreement survive the close of the transaction and thetransfer of the business. This will enable you to make futureclaims subject only to applicable statutes of limitations.

Step 4. Be Ready When the Seller Says...

Our business expenses are really a lot less than shown in the books. I run a lot ofmy personal expenses through the business. Hey, I even vacationed in London last yearand charged the whole trip to the business. Or says...


Look, we do a lot of cash business. To be honest with you, we don’t report all of ourincome. Business is really much better than what is shown on the books.

If a seller is lying to the IRS about the business’s income and expenses,what makes you think you’re getting the straight story?

• Negotiate to key a portion of the purchase price to the business’sfuture earnings or profitability. This tactic protects you if the seller’sprojections or historical earnings representations prove untrue.For example: Part of the price may be based on a percentage ofthe increase in future earnings over the prior earnings shown onthe books.

• Negotiate a definition of earnings that excludes extraordinary itemssuch as the sale of noninventory equipment.

Step 5. Can the Seller Become Your Competitor?

Will your business be hurt if the seller suddenly starts competing with you?Don’t take that chance.

• Negotiate the seller’s promise (covenant) not to compete by at-tempting to influence or divert customers from the business.

But what if the seller opens a similar business and doesn’t try to divertexisting customers, who nevertheless flock to the seller’s newly opened door?

• Negotiate restrictions as to when and where the seller may open asimilar business. For example: The seller agrees not to engage in thecatering business in Los Angeles County for a period of five years.

Negotiating alert: Is it necessary to negotiate with the seller’s key employeesfor a similar covenant not to compete? If so, will the employees’ covenantnot to compete be enforceable under state law? If necessary, check withyour attorney.

Step 6. Keep Trade Secrets Secret

Trade secrets are proprietary information that is vital to the success of abusiness. Depending on the nature of the business, they may include:

• Customers’ names.• Suppliers’ names and prices.• Unique techniques, methods, or procedures.• Special formulas or recipes.• Source codes or computer software.• Salary and employee information.

Prevent the seller from making trade secrets available to others who coulduse them to your competitive disadvantage. Negotiate covenants that prohibitthe seller from:

Business—Purchase 155

• Disclosing to third parties specifically identified lists, data, processes,and so on, that are vital to the effective and successful conduct ofthe business.

• Removing or duplicating drawings, plans, software, lists, and docu-ments that are specified as trade secrets.

Step 7. Put Teeth in Your Deal

To bite hard, negotiate a broad indemnification agreement that states the sellerwill hold you harmless by paying or successfully defending any claims or de-mands made on you by third parties if the claim or demand arose from some-thing that happened before you bought the business.

No matter how artful your indemnification agreement, if the seller is tappedout, you might as well have had no indemnification agreement at all.

To bite harder:• If you will be giving the seller your promissory note, negotiate the

right to offset and deduct from future payments the amount ofany claim you may have against the seller.

• If you will be paying all cash, negotiate a hold-back—a portion of thepurchase price (the amount negotiated) held by you in a reserveaccount for an agreed-on period. Your claims against the sellerwould be reimbursed from the hold-back reserve.

The seller will want advance notice of your intent to claim a hold-backportion, in order to contest the merits of your claim in accordance with youragreement’s dispute resolution procedures.

Reality bite: keep in mind that—• People are less cavalier in making representations when there is a

potential for personal liability.• The more folks who are on the line, the more likely you will be

successful in asserting your claim for money.To bite the hardest when the seller is a corporation, limited liability company,

or partnership, negotiate that each of its officers, shareholders, partners, andprincipals must join in as cowarrantors and indemnitors.

Step 8. Avoid Asset Purchase Surprises

Here is a sampling of some of the unexpecteds:• Surprise: The seller’s license and permits may not be transferable.

You may have to make new applications.• Surprise: Motor vehicles, trademarks and trade names, accounts

receivable, leases, inventory, fixtures, contracts with third parties,boats, and real property are each transferred differently. Deter-mine what is required for the proper and legal transfer of assets.


• Surprise: Failure to follow applicable laws may enable the seller’screditors to levy or foreclose on the assets which you paid forand received. Determine what is required under local law to ob-tain lien-free, clear title to assets. Understand your state’s bulk saleslaws and the required filings at state and county levels.

• Surprise: If the purchase price you are paying is not fair and for a“reasonable equivalent value,” it has the potential of being over-turned by the seller’s creditors.

• Surprise: Under state law, you may inadvertently assume the seller’sliabilities to former employees. Ascertain the law in your state.

• Surprise: You may be held accountable for the business’s environ-mental liability and defective product claims, even though theterms of your purchase agreement provide otherwise. Negotiatefor the seller to indemnify you from any successor liability claims.

• Surprise: The accounts receivable being purchased may not be ascollectible as represented. Negotiate for a seller’s obligation to re-purchase from you past-due and uncollectible receivables.

• Surprise: Equipment and furnishings that are not inventory aregenerally subject to a sales tax. Tax obligations most often are theresponsibility of the seller. The seller, however, will typically seekreimbursement for the sales tax from the buyer. Generally, ab-sent a contractual obligation by the buyer to reimburse the seller,the buyer is not liable for the sales tax.

Negotiating tip: Between the parties themselves, determining which partywill bear the sales tax burden is negotiable.

• Surprise: Key employees often quit after a business changes hands.

Practice tip: Get assurances from key personnel that they will remain withthe business. Clarify whether those employees will be looking to you tohonor accrued vacations and other benefits.

Step 9. Talk to a Pro

Maybe you are best off buying the assets that comprise a business: inven-tory, accounts receivable, equipment, trade name, leases, and so on. As part ofthe deal, you may agree to assume certain obligations and payables.

Maybe you are best off buying the shares of a corporation (or limited liabil-ity company) that owns the assets that comprise the business. Corporationshave assets, but they also have obligations, debts, and adverse claims.

Engage the assistance of professionals who can guide you through the mazeof tax, legal, and dispute resolution considerations.

157

Business—Sale

Negotiating the “No Surprises Later On”

Sale of a Business

Step 1. Remember the Scotts

The Scotts spent their lives building up a small-but-profitable and very cred-itworthy gift boutique. They were justifiably proud of what they had accom-plished and looked forward to their pending retirement.

Wolfe offered them a surprisingly large price for their prized business. Thepurchase would be funded by a small cash down payment plus a very sizablepromissory note.

The Scotts had no insight into Wolfe’s objective—to loot the Scotts’ business.Wolfe used the boutique’s fine credit for the purpose of obtaining loans

and buying merchandise for which no payment was ever made. The Scottsnever received a penny more than the cash down payment.

People are funny. I know the Scotts; they are like a lot of other goodbusinesspeople. If Wolfe had wanted $1,000 in customer credit, they wouldhave gotten all kind of information about him. But the Scotts were not “pro-grammed” to obtain information about a business buyer.

Step 2. Preparing for the Other Shoe to Drop

Whether you are selling your shares in a corporate-owned business orselling the assets that comprise a business, your buyer will demand from youcertain warranties and representations. Examples of common warranties are inthe preceding Playbook section, “Business-Purchase.”

In agreeing to indemnify the buyer, you are promising to reimburse thebuyer for losses that result from the breach of those representations andwarranties.


As a seller, you will want to limit the scope and extent of your liability. This can beaccomplished if you:

• Negotiate an aggregate dollar limitation on the amount your buyercan claim from you for breach of warranty. For example, in noevent can the buyer recover more than $25,000 as a result of abreach of warranty claim.

• Negotiate that indemnification payments will be limited to amountsremaining to be paid to the buyer from future note installmentsor from “earn-out” payments if part of the purchase price is keyedto future earnings.

• Negotiate that, for indemnification purposes, the buyer’s reim-bursable losses are calculated on an after-tax basis. The buyer’sactual out-of-pocket losses may possibly be reduced by a tax ben-efit resulting from a tax deduction.

• Negotiate a limited time period during which the buyer may bringan action for breach of warranty. For example, no claim for breachof warranty will be valid unless made within six months from thedate the business changes hands.

• Negotiate basket limitations to avoid arguments over relatively nomi-nal breaches. For example, no claim will be honored until thebuyer’s aggregate claims exceed $10,000.

• Negotiate the scope of your warranties by limiting them to whatyou actually know. For example, instead of representing absolutelythat “the financial statements are complete,” your warranty wouldbe one of limitation: “To the seller’s actual knowledge, the finan-cial statements are complete.”

• Negotiate the apportionment of liability among the sellers if thereis more than one. For example, if you own 30 percent of thebusiness being sold, you will not want to have potential responsi-bility for 100 percent of the buyer’s claims.

• Negotiate limiting your liability for faulty or defective goods orequipment to reimbursement of what your buyer actually paid forparticular items. This will eliminate the buyer’s potential claim forlost profits or other losses that are a consequence or result ofyour breach.

Practice tip: Rather than warranting the condition of equipment being sold,allow the buyer to thoroughly inspect that equipment and sell it in as iscondition.

Step 3. Getting Off the Hook, Staying Off the Hook

If you are selling assets, chances are you will want to negotiate the buyer’s as-sumption (and payment) of all or some of your business’s debt. This is particularly

Business—Sale 159

true if you have a postsale obligation to an equipment lessor, landlord, or in-stallment purchase financier.

• Negotiate for the buyer to secure its promise to you that theseassumed obligations will be paid. The buyer’s security can bereal estate, the equipment being sold, or other good collateral. Ifthe buyer later reneges by not paying the assumed debt, youwill be in a position to foreclose on the collateral that securesthe buyer’s promise of payment.

Is the buyer a corporation or limited liability company?• Negotiate for the buyer’s principals to personally guaranty that

assumed obligations will be timely paid. If you are concernedabout the financial ability of the guarantors, these personalguaranties can be secured by the personal assets of theguarantors.

Step 4. Protect Yourself from Earn-Out Manipulation

Is a portion of the purchase price based on the buyer’s future earnings(earn-outs)? Safeguard yourself against earn-out manipulation. Until you are paid:

• Negotiate that the business being purchased is to be operated asa distinct entity separate from the buyer’s other operations,which could impact earnings.

• Negotiate that equipment and fixtures necessary for conductingbusiness can’t be disposed of without your consent.

• Negotiate that there can be no material changes in the type,scope, or manner of operation of the business.

• Negotiate to restrict allocations of expenses for overhead if thebusiness being purchased will be operated as a subsidiary.

• Negotiate the right to regularly review the buyer’s financialstatements and earn-out calculations.

Step 5. Make the Buyer’s Promissory Note

as Collectible as You Can

• Reality Bite No. 1: Now-you-see-it, now-you-don’t collateral. Youcan lose the benefit of having a secured note if the inventory,accounts receivable, and/or equipment serving as collateral canbe readily sold or collected with your knowledge or consent.

• Reality Bite No. 2: You may get your business back. Having a notesecured by the inventory or fixtures of a business means youhave to be emotionally and financially prepared to take thebusiness back if you are forced to foreclose on your collateral.(And this assumes the business is still intact.)


• Biting Back. Negotiate for the equity in the buyer’s home orother real estate to be posted as additional collateral securingpayment of the note you are being given.

What if the buyer can’t provide satisfactory additional security? Demandthat the buyer’s note obligation be guarantied by others who do have financialsubstance.

Practice tip: The guaranty should not be for eventual payment of the noteobligation but a guaranty of timely payment.

Consider: Does it make sense to collect receivables yourself rather than sellthem? Selling good accounts receivable is like selling cash.

Negotiating alert: If the buyer insists on purchasing your receivables, it maybe a sign that the buyer is in shaky financial condition.

Step 6. Talk to a Pro

Selling a business requires the assistance of professionals versed in businessand tax.

161

Cohabitation Agreement

Negotiating an Agreement Between

Unmarried Cohabitants

Just when you thought divvying up closet space was the hard part...

Step 1. It’s Time to Get Real

Now is the time to discuss your expectations and concerns forthrightly.These discussions can be a rewarding and enriching experience that will lead toa new understanding and appreciation of your relationship. They can also be arevealing and disappointing tug-of-war.

Step 2. Understand What Is and What Isn’t

Generally speaking, there is no automatic right to property or support merelybecause a person was once a nonmarital partner.

In states where any rights of nonmarital partners are recognized, thoserights have nothing to do with alimony. They do, however, have everything todo with contract law.

In these so-called “palimony states,” the “rights” granted by courts are noth-ing more than the right every individual has to enforce a lawful contract eventhough the contract provides for typically “spousal” benefits.

In some of the states where cohabitation agreements are enforceable, thelaw is further evolving to protect the expectations of cohabitants who do nothave a written contract. The courts in those progressive states are willing toexamine the conduct of the cohabitants to determine whether an “impliedcontract” or an “implied partnership” existed. But a nonmarital partner may beunable to establish an implied contract or an implied partnership. A writtenagreement is therefore imperative.


Step 3. Negotiate the Character of the Relationship

If it appears that your agreement is primarily for sexual services rather thanfor love, companionship, healthcare, or sharing of financial resources, a courtmay deny enforcement of your cohabitation agreement on the grounds that itsprimary purpose was the procurement of immoral and illicit acts. Negotiateand document with specificity the purpose and character of the relationship.

Step 4. Negotiate Specific Support Rights and Obligations

A written cohabitation agreement to “support” or “take care of” may be toovague to cause a division of property or a court order of support.

If your agreement is to be upheld, the negotiated respective rights andobligations of the parties must be clear and specific.

Consider negotiating and including the following in the cohabitation agreement:• Who will pay all or a greater part of living expenses?• Will earnings and income be pooled?• Who will pay taxes, upkeep, and maintenance on property

owned by one of the parties?• Will payments be made to the “pal” periodically—for example, X

dollars per year on the anniversary of cohabitation?

Step 5. Negotiate What Happens

if There Is a Mutual Breakup

Consider negotiating and including in your cohabitation agreement what will hap-pen if the relationship breaks up:

• Will there be post-cohabitation support? If so, will the supportbe keyed to how long the partners lived together—for example,one month of support for each month of cohabitation?

• Who will vacate the premises and who will stay?• Who will keep furniture and other items jointly purchased

during the relationship?

Step 6. Negotiate What Happens if a Partner Receiving

Financial Benefits Calls It Quits

What happens if the partner seeking to enforce the cohabitation agreementwas the one who ended the relationship? A financially benefited partner shouldnegotiate and document what will happen in this eventuality to avoid a de-fense based on breach of contract.

Cohabitation Agreement 163

Step 7. Negotiate Death Benefits

A nonmarital partner’s will can be changed at any time without the otherpartner’s knowledge or consent. A cohabitation agreement is a two-party con-tract that can be changed only by mutual consent.

Consider negotiating and including in your cohabitation agreement:• Upon a partner’s death, the surviving partner will receive a

stipulated allowance per month for a specified period of time.• The partner will own and be the beneficiary of an insurance

policy on the life of the other partner.• Upon a partner’s death, the surviving partner will continue to

live in the deceased partner’s residence for a specified time.

Step 8. Get a Lawyer

Your cohabitation agreement will be better able to withstand a challenge if ithas been reviewed by your partner’s lawyer. The lawyer should acknowledgein writing that the cohabitation agreement was read, understood, and enteredinto by your partner free from duress or undue influence.

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Collecting Money

Negotiating the Collection of Money

Without Sounding Like a Wimp or a

Self-Righteous Money Grubber

Nobody likes to collect money. It’s the worst job in the office.Who wants to hear yelling, threats, poor-mouthing, a diatribe of how you

could have done something a little better, a little faster, a little differently?Who wants to be embarrassed and have unjustified feelings of defensive-

ness when someone asks, “Don’t you trust me?”Everybody knows it’s hard enough to get business, much less chance losing

it to a competitor because you are being pushy about your bill. Won’t people bedissuaded from doing business with you if they see you as relentless and uncar-ing in your collection policies?

Not necessarily. It’s possible to collect what’s coming to you while preserv-ing important relationships. Here’s how.

Step 1. Have a Creditor’s Mindset

Remember that the money is yours. You earned it. You are entitled to receiveit when promised. You are not looking for a contribution or a handout.

Step 2. He Who Hesitates Loses

The longer you wait to call a potential problem account, the less likely youare to collect. The time to start is within a few days of when the payment hasbecome overdue.

Step 3. Don’t Be a Wimp

Let’s face it. The following bad-move lines are wimp-outs.

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Collecting Money 165

• Bad Move No. 1: Can you send a partial payment on account? Apartial payment can be $20 on a $1,000 balance, which ishardly what you had in mind.

• Bad Move No. 2: Look, we have bills to pay, too. Who cares? Andbesides, your needs have nothing to do with collecting what ismorally and legally yours to collect.

• Bad Move No. 3: How much can you send us? Discussions shouldfocus on how the bill will get paid, not on what will be sent thisweek.

• Bad Move No. 4: If it’s not too much trouble, would you send ussomething today? The wrong person is on a guilt trip and itshows. Why are you apologizing for asking someone to keep apromise?

• Bad Move No. 5: I’d like you to pay your bill or at least half. Nameone person who will send 100 percent if there is an invitationto pay 50 percent.

Step 4. Ease Your Tension

If you feel anxiety or discomfort in asking for your due, reestablish linkage.• Start with chit-chat if you can make it sound natural and

unscripted. Sports and natural disasters are great icebreakers:Did you see the game Saturday? Did you have wind damage to yourhouse?

• State why you are uncomfortable: I hate calling you about yourbill and I wish we didn’t have to discuss money. If you would rathertalk later, tell me when I should call back.

The offer to defer the discussion shows you really are sensitive to yourcustomers as people and are not viewing them as collection statistics.

Step 5. Negotiate a Definite Course of Conduct

Being promised “a payment” is not good enough. If you are not getting afull payment, then be definite about the amounts being sent and the time framefor payment in full.

• I need to know exactly how much you are sending, when it is beingsent, and how the balance will be paid off.

• How much time do you need to pay off the account?• How short of the full payment are you?

Without a definitive, specific understanding, you will be pleading for moneyon a weekly basis.


Step 6. How to Avoid the “P” Word

If you can’t say pay, then use weasel words: I need you to clear this account; Ineed you to bring your account current; I need you to take care of the balance.

Step 7. Ask About “How”

You have requested the debtor to pay your bill. The next step is a question:How do you want to clear (take care of, pay) the account balance—by cash, credit card,or check?

Step 8. Say Nothing

The debtor will respond to your question in Step 7 if you say nothingmore.

The response may be a promise of payment (not good enough unlessspecific) or an excuse for not paying (now is the time to put the excuse on thetable for discussion, compromise, or rejection).

If the debtor asks to discuss the situation later, then get a commitment as towhen and where: I understand that this is an inconvenient time. When should I callback?

Negotiating tip: It is harder to say no in person: A face-to-face meeting maybe more productive than a phone call. If the amount is significant and it isnot physically inconvenient, meet at the debtor’s office. Your customer willnot have a Let me reexamine my records at the office excuse for dodgingpayment. And even better, that’s where the checkbook is!

Step 9. It’s Not Over Until It’s Over

If you’ve used the tactics described above and payment still isn’t made,consider these money extractors:

• Joe, our controller pulled your account as one of the ones to be turnedover to the lawyers for collection. I retrieved your file and said that Iwanted to talk to you myself about your balance.

• Joe, our controller pulled your account to go to collection. I understandthings are tough and you aren’t sure when you can make payments. Ican give you some slack if you will sign a promissory note.

Unlike open account relationships, a note generally will have a definitepayment structure, accrue interest, and provide for late payment penalties andthe reimbursement of legal expenses. Traditional defenses (late delivery, prod-uct defects, and so on) may not be available to the debtor once the obligation ismemorialized in a note.

Negotiating tip: Is there a dispute as to the amount owed? Perhaps deliverywas late or specifications were not met.

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Consider this: Assume a $4,000 claim is reduced to $2,000 and will bepaid in monthly installments. To put teeth in the deal, cast the note as a $4,000note which provides for $2 of credit for each dollar timely paid.

If all the payments are timely, only $2,000 would be due. If half the pay-ments are timely, $3,000 would be due. And if none of the payments is timely,$4,000 would be due and you would possess all the rights and abilities of anote holder.

Practice tip: If the business is a corporation or other entity, request theowner’s personal guaranty of payment. Talking big numbers? Consider hav-ing the note secured by company assets, by the owner’s home, or by othergood collateral.

Are these requests overreaching? Not when your customer is asking youto forbear from collection action or is seeking more credit.

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Contractors

Negotiating With a Pool/Building/Masonry/

Roofing/Painting/Landscape or Other Type of

Contractor

Your preliminary discussions with possible contractors should be treated as jobinterviews. Ask about qualifications, similar jobs done recently, and references.

For bigger jobs, find out who would generally be supervising your project.Unless you have a comfort level with that person, you will not have peace ofmind until the job is over.

Consider tossing out bids which are 10 percent or more below the other bidsyou receive. Low bids are a sign of an inexperienced or desperate contractor.

Step 1. Negotiating the Quality of Work

Avoidable disappointment: It was an exciting project—paneling your den and install-ing bookcases and cabinets. But now that it’s done, all you can say is that the workman-ship and materials are not nearly as good as you expected.

Negotiate that the quality of the completed job will be first-class, professional,and workmanlike.

Job materials (for example, the type, quality, and size of wood moldings, thebrand, model, and finish of door hardware) can be described with objectivespecificity.

Workmanship, however, is subjective and not easily defined. Finish carpentryconsidered first-class in a $300,000 house may be considered third-rate in a$1,500,000 house.

Ask to see the contractor’s completed jobs that are similar to your own. Ifyou like what you see, negotiate that those jobs will be your reference point—a visible, tangible, preagreed standard of the workmanship you are buying. Forexample: Paneling, bookcases, and cabinets will have the same quality, workmanship,materials, and finish as in the Joneses’ remodeled family room.

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Contractors 169

Step 2. Negotiate the Use of Specific Subcontractors

Avoidable disappointment: You are landscaping. A friend has a stone walkway thatlooks just like a meandering stream bed. You decide to install a similar walkway. Some-how your friend’s walkway seems special and yours looks very ordinary.

Most general contractors employ their own laborers and carpenters. Ev-erything else is subcontracted. To prepare a bid for your job, subcontractors willbe called in by the general contractor to estimate their portions of the job.

If you are using a general contractor and know of subcontractors (cabinet-makers, masons, wallpaper installer, and so on) whose work you admire andwant incorporated into your job, then negotiate and contract that your generalcontractor will use those specific subcontractors on your project.

Step 3. Insist on a Detailed Contract

Avoidable disappointment: You signed a contract to have your office’s interior wallspainted. The day before the painter is to start, he asks when the file cabinets will bemoved away from the walls and whether you want to pay extra for removal of brack-ets and filling in the holes.

Imagine being in a legal dispute with your contractor. Now ask yourself: Isthe contract sufficiently detailed to support your position?

Painting a room involves a lot more than putting paint on a wall. How willthe wall be prepared? What is the type of paint? Is it a quality brand? Howmany coats will there be? Will the color be custom? Will electrical outlets bepainted the same color as the walls? Will hooks and brackets be removed? Whowill move heavy furniture pieces?

Request that your contract contain a room-by-room breakdown that speci-fies exactly what will be done and how it will be done.

Your contract should contain specification sheets: brands, model numbers,quantities, thickness of wood, sheetrock (dry wall), number of coats of paint,size and type of wood used for moldings and other mill-work, and similardetails.

Step 4. Negotiate Change Costs and Credits

Avoidable disappointment: The contractor’s bid for the room addition was reason-able. During framing, you requested a few changes. The charge for adding anotherexterior door and expanding the size of two windows was unreasonable.

Some contractors will bid low to get your job. They know that most own-ers will request changes as the job progresses. Once the initial contract is signed,you are truly a captive customer. High-priced “extras” help offset low bid prices.

• Negotiate change order costs. To avoid being a victim, negotiateup front the cost of unforeseen charges by using a formulaticapproach. For example, any additions or modifications during


the course of the job will be charged at the contractor’s actualcost of materials and labor plus 15 percent.

• Negotiate change-order credits. You are remodeling a bathroomand decide to install one bathroom sink rather than two. Howmuch will you be credited for the second sink?

The credit you will receive if you decide to delete a contracted item can alsobe formulatic. For example, if you delete an item, you will receive a credit equalto 85 percent of the cost allocated to the materials and labor associated with thedeleted items.

Step 5. Negotiate Time-Schedule Penalties

Avoidable disappointment: It is now the end of July and your job, which was to befinished in May, has a way to go.

Find a contractor that offers a specific completion date and negotiate a per-daymonetary penalty for each day the job goes unfinished after that date. Forexample, except for delays beyond the contractor’s control, the job price will bereduced by $100 for each day the job remains incomplete after June 1st.

Step 6. Negotiate a Way Out

Avoidable disappointment: That amiable contractor who won you over before yousigned his contract is now just plain impossible. His work is shoddy and he’s behindschedule. Some days, you sit around waiting for him and he doesn’t show up at all.

Firing a contractor during the course of a job can be a real problem if a wayout is not negotiated and documented up front.

Most contracts provide for “progress payments.” For example, if you weredoing a room addition, the contractor would receive a percentage of the con-tract price at signing, an additional percentage when the foundation is installed,an additional percentage when the framing is done, and continuing paymentsas each stage of work is completed.

What if you terminate the contractor between progress payments?What if you terminate the contractor just after a progress payment, but the

contractor has now received more money than is represented by the amountof work done so far? (This is the way contractors structure progress payments.)

Negotiate and contract that:• In the event of a breach, you may terminate the contractor

upon X day’s written notice, during which time the contractorhas an opportunity to remedy the breach.

• If the breach isn’t cured, you can have the work completed byanother contractor of your choosing.

• Upon final completion of all work by the replacementcontractor, the original contractor will be paid the difference

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between the contract price and what it cost you to completethe job.

Step 7. Negotiate a Progress Payment Schedule That

Makes Good Business Sense

Avoidable disappointment: Your roof replacement payment schedule provides for a75 percent payment when roofing materials are delivered to your home. The tar paperand roof were delivered two weeks ago. You made the 75 percent payment. Now youare learning that the job probably won’t be started for another week or two.

You do not need to accept the contractor’s job progress payment schedule.Negotiate a schedule in which the size of the payments is representative of thevalue of the work completed as of the date of payment. It’s okay for the con-tractor to always be a-little bit ahead.

For example, if you gave the contractor a 10 percent down payment foryour room addition, you wouldn’t pay 30 percent more when the foundationwas set, because the job would not be 40 percent underway.

A common “trick” is to condition some progress payments on delivery ofmaterials alone. This encourages delivery of materials long in advance of whenthey will be used.

Practice alert: Prior to making each progress payment, have the contractorsupply you with a copy of a lien release form, which releases your propertyfrom any lien arising from the contractor’s having furnished labor or materialsto your job.

In most states, the release should be signed by each of the contractors,subcontractors, laborers, and materialmen who have filed the appropriate pre-liminary notices. Determine the law in your state.

Step 8. Make Yourself Surprise-Proof

Avoidable disappointment: You thought your $20,000 swimming pool contractwas just that, a $20,000 swimming pool contract. But the contractor says, “Excavationproblems have been discovered and $5,000 more is needed to pickax through a layer ofrock.”

Try to avoid leaving any part of the job “open” until the contractor canbetter determine what needs to be done when the wall is opened, the ground isbroken, and so on. Pros will generally know what needs to be done at the timethe contract is prepared. Open-ended contracts are an invitation for trouble.

If the job is different than expected and left partially “open,” suggest to thecontractor that he shouldn’t profit from your misfortune. Negotiate that “openwork” will be at the contractor’s actual cost without profit.

Practice tip: If appropriate, have your contractor acknowledge that it hasindependently (and not through you) ascertained the geographical con-ditions of the job property and the general and local conditions pertainingto your job.


Step 9. Negotiate a Completion Bond

Avoidable disappointment: Halfway through a room addition job, your contractorannounces he is quitting. The job was underbid and every day of work means he islosing more money.

Completion bonds are issued by bonding companies. They will see to itthat your job is finished at the original contract price if your contractor hopsinto his pickup and is never to be heard from again. Negotiate to have thecompletion bond premium borne (at least in part) by the contractor.

Negotiating alert: If the contractor refuses to get a completion bond, checkout his reputation. The bonding company may not consider him bondable.

Step 10. Negotiate Warranties

Avoidable disappointment. You just spent $15,000 for a new roof. The first heavyrain brought leaks and water damage to your grandmother’s piano.

There will be times when you will negotiate for the inclusion of a warrantyin your contract.

For example:• For six months, newly planted trees and bushes will survive, in

healthy condition.• For five years, your roof won’t leak (the warranty could be for

leak repair as well as reimbursement for interior water damagecaused by the leak).

• For six years, pool plaster won’t flake or break.• For seven years, exterior paint won’t peel.

Step 11. Negotiate a Fast, Cheap, and Efficient Dispute

Resolution Procedure

Avoidable disappointment: On balance, you like your contractor and don’t want toterminate the contract. However, you and the contractor often have heated disagree-ments. The contractor has told you that you are a perfectionist and, with your zerotolerances, you are asking too much in a kitchen remodel.

Quality is in the eyes of the beholder. You and your contractor may not seethings the same way.

To resolve differences through litigation, arbitration, or mediation causesmid-job delays and is costly, time-consuming, and emotionally draining.

Now is the time to agree on a fast, cheap, and efficient dispute resolutionprocedure. For example, if you have an architect, negotiate that both you andthe contractor will accept the architect’s decision as final and binding. If there isno architect, consider naming a mutually trusted industry professional whocould serve as the arbiter of disputes.

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Step 12. More Tips to Consider

As applicable, negotiate for your contract to provide that:• The contractor, at its own cost, will maintain a policy of liability

insurance, insuring you against loss or injury connected with theperformance of the contract. Ask to see evidence that this insur-ance is in place before work commences.

• The contractor will indemnify and hold you and your property harm-less from claims and losses arising from death or injury or damageto another’s property.

• The contractor will, upon completion, remove debris and surplusmaterials from your property, leaving your property in broom-clean condition.

• The contractor may not assign your contract or delegate its dutiesunder the contract to a third party without your written consent.

• The title to all materials delivered to your job site will be deemedto have passed to you.

Practice alert: Check with your insurance agent to see if you should have“course of construction” vandalism, malicious mischief, and material theftinsurance.

A final note: That printed contract you are being asked to sign was preparedby an association whose only function is to protect and serve contractors. Readthe small print front and back. Make whatever changes are necessary for you tobe properly protected.

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Contracts

Contract Negotiating

The macro-pivotal points of an agreement have been agreed on. A sym-bolic handshake has indicated that the parties are in sync. But total consensus isa long way off. The micro terms and conditions are now up for negotiation.

Step 1. Repush Motivator Buttons

Reconfirm your understanding of those deal points that satisfy the otherperson’s needs. It was the desire to satisfy those needs that led to an agreementin principle.

Step 2. Move From Agreement to Agreement

Discuss other major issues on which you already agree. Positive feelings arereinforced and rapport is enhanced as you move from agreement-to-agreement.When issues in conflict are tackled too early, there is a greater chance resistanceand hostility will result.

Step 3. Reach Agreement in Principle

If you don’t totally agree on a major issue, then try to reach a broader,more general understanding as to that issue. This understanding will becomethe basis for further discussion.

Step 4. Tackle Nonmonetary Issues First

Once a positive feeling is in place and a collaborative spirit is established,turn to major issues in conflict, beginning with nonmonetary issues.

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Contracts 175

Step 5. Divide and Conquer

Break conflict issues into components that can be dealt with individually.Start with those components on which agreement is more likely.

Step 6. Put Preservatives in Your Deal

If is the magical give-and-get concession word. The easiest if to ask for andget may turn out to be your most important—a compliance concession.

Compliance concessions that make for a sturdier deal can take many forms:• A liquidated damage provision stating an agreed-on sum certain to

be paid to you in the event of breach. The time and expense ofproving the extent to which you were damaged by the breachare eliminated.

• A high interest rate on a note, which is retroactively reduced if allnote payments are timely made.

• A price increase for each day that a scheduled sale closing doesnot take place.

• A price discount if the ordered goods are not delivered on time.• A late-payment fee for payments not made on time.• A revocation of rights if payments are not made on time, for

example, nullification of an option to renew if rent paymentsare not made in a timely fashion.

• An enforcement cost recoupment provision that discourage breachby making it possible for you to recoup your lawyer fees andrelated costs in a legal action to enforce the contract.

When you are being assured prompt and faithful payment, completion, ordelivery, it is hard to be denied your compliance request. If the other personreally means to keep the promises being made, he or she has nothing to lose.

Step 7. Favored-Nations Negotiating

Favored-nations contract provisions are negotiating devices that can:• Assure the best possible price: The seller agrees that he will not,

during the next year (quarter, month), sell to another buyer an XYZunit on more favorable terms or for a lesser price than is provided forin this contract.

• Test your negotiated bottom: The seller warrants that he has notsold an XYZ unit during the previous 90 days on more favorableterms or at a lesser price than is provided for in this contract.


Step 8. Negotiate a “Stockyard” Clause

One client calls it my all-purpose “stockyard-being-built-down-the-road”clause. Whatever you call it, it has served me well through the years.

The safety-net language to negotiate is to the effect that the seller (for ex-ample, landlord) has no knowledge or information which if made known to the buyer(for example, tenant) would discourage or dissuade the buyer from entering into thisagreement.

• For a client negotiating to buy an upscale apartment building,the clause flushed out the rumor that a halfway house wouldbe the new neighbor down the block.

• For a client negotiating to buy acreage in Denver next to aTarget store, the clause forced the seller’s revelation that waterwouldn’t be allocated to the site for two years.

• For a tenant negotiating a restaurant lease, the clause compelledthe landlord to disclose that the neighborhood had become anevening gang hangout.

Step 9. Negotiating Through Documentation

Deals are cut on macro-deal points. There are always lesser micro issues thatgo undiscussed. If your side drafts the agreement, then your side will be able todeal with all those unattended issues in a manner most favorable to you. Theother person may request some changes, but your side’s language will in largepart go untouched.

But then—there was the exotic animal-breeding deal. There was a deal tobankroll a group searching out Noah’s ark. And a U.S. astronaut wanted me tonegotiate a deal involving a commercial project in outer space.

I confess: sometimes I find myself on unfamiliar turf. In those instances,after the most basic terms have been agreed on, I have found that it makesgood sense for the other side—assuming the principals are more knowledge-able—to prepare the contract. Why? First, I don’t want to tip them off as to howlittle I know about the subject matter. Second, their document will raise pointsand issues that I may not have considered and can now negotiate.

Step 10. Red Line

Contracts will be reviewed and changed. If your side drafts the contractand changes are requested by the other party and are agreed to by you, thensend along an additional copy of the revised contract on which you have redlined (underlined) where the changes have been made.

Red lining channels and directs the other party’s focus to the underscoredchanges, obviating any need to reread the entire contract. When the entirecontract doesn’t need to be reviewed, you have lessened the chance that pre-viously accepted terms will be revisited and renegotiated.

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Crisis, Public Relations

Finessing a Public Relations

Crisis of Confidence

A death resulting from poor food-handling procedures at a restaurant; toxicwaste dumping; unsafe products; price gouging at a convenience store...actsperceived as threatening safety, public health, or the environment, or as beingunfair business practices can throw any business into a crisis mode. Here’s howto handle such a crisis.

Step 1. Gather Facts Quickly

You must dispel any impression that you are unconcerned or have lostcontrol. Hard facts will help you avoid the temptation of making a blanketdenial that later may be proven inaccurate or untrue. Hard facts will enableyou to avoid conflicting explanations that would exacerbate the loss of publicconfidence.

Step 2. Avoid a “No Comment” Response to the Media

It’s the easy and natural thing to say. But when you are confronted by themedia, a “no comment” response:

• Gives the impression that something is being hidden.• Implies that the questions being asked are unworthy of an an-

swer.• Suggests that the public is not entitled to information.• Forces the media to look to alternative sources of information—

sources that may be less accurate or may have interests adverseto your own.


Calmly explain why you aren’t making comment: “We are still investigat-ing.” “That’s a trade secret. We can’t reveal it.” Then give out any informationyou are free to divulge.

Step 3. Designate a Spokesperson

Keeping your own personnel informed builds a sense of organizationalunity. However, it’s important to control alternative sources of information.Give your staff instructions to refer inquiries to a designated spokesperson.Even if a conversation or interview is “off the record,” make it clear to yourpersonnel that they are not to divulge or share information.

Step 4. Containment Versus Control

Your lawyer’s job is containing the crisis. By nature, lawyers are reactive.They think about defending against lawsuits. As spokespersons, they tend to beprotective, restrictive, and rigid.

Your public relations pro’s job is controlling the crisis. They are proactive. Pub-lic relations pros will set a “forgive and forget” agenda.

Should you move toward containment or control?Ask yourself: Will governmental investigations or probing media inquiries

make it very unlikely that damaging information can be concealed for any sig-nificant time? If the answer is yes, then opt for control.

Step 5. If Your Choice Is Control,

Acknowledge There Is a Problem

Denying that the problem exists will erode credibility. For people to “for-give and forget,” they must believe they are dealing with essentially honestpeople who are genuinely trying to remedy the problem.

Step 6. Demonstrate Concern

Losing public credibility may have more damaging long-term impact thanis presented by the crisis at hand. Show a dedication to the problem’s promptresolution by promising and demonstrating cooperation with investigativeauthorities.

Make the public aware of the progress of your investigation into the facts.

Step 7. Set the “Spin”

Impressions are made in the media. Negative impressions, once formed,are hard to dispel. When you are proactive, you modulate the agenda, tone,and mood of your story.

Set the “spin” by controlling the public’s perception of the situation as wellas your response and attitude toward it.

Crisis, Public Relations 179

Get your information out frequently and quickly.Tell your side of the story, discussing the problem in the context of your

business record. This can be done through ads, letters to editors, press confer-ences, and press releases.

Most importantly, apologize if appropriate.

Step 8. The NEVER EVERs

• NEVER EVER take a reporter’s call unless you know the reporteror know what he or she wants, and why.

• NEVER EVER be goaded into a fast-response, reactive commentyou will later regret. The more inflammatory the question, themore composed and collected you must be when answering.

• NEVER EVER be hostile or condescending. Hostility fosters con-tempt. Being condescending may come across as apologetic.

• NEVER EVER speak to the media without being thoroughly pre-pared (preferably by a public relations or media pro).

• NEVER EVER answer complex or hard questions with long an-swers. Long answers often have unintended response compo-nents which in themselves create new issues.

Here’s how you can cool down too-hot-to-handle questions.• Deflect hard questions with a tough or complex question of

your own. (For example, On what specific facts are you basingyour question?)

• Postpone answering. There are some things I need to confirm beforeI can give you an accurate answer.

• Answer briefly. The longer the question, the shorter yourresponse should be.

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Cruises

Negotiating a Super Cruise Fare

Rich or just comfortable. Native or foreign-born. It seems that all passengerson board like to talk about the good deal they got on their cruise fare.

On my first cruise, I discovered this phenomenon the hard way. To myhorror, apparently only I and an elderly couple from Montana had actuallypaid full fare.

Since then, as a shipboard lecturer and frequent cruise passenger, I havefinally figured out the secrets of “cruise control.”

What’s the Main Game?

You are about to understand why your travel agent is always so nice inarranging for champagne on ice to be delivered to your cruise ship cabin.

The “base” commission paid to travel agents by the cruise lines is generally10 percent on the cruise fare; 5 percent air, pre/post cruise hotels; 10 percenton optional travel insurance. If you and three friends book a $5,000-per-personcruise, we are talking about a $2,000 commission to make a phone call. Andthe phone call is toll-free!

The Preferred Account Game

Some travel agents have a preferred-account relationship with various cruiselines. These folks are the bigger cruise brokers who advertise and sell a lot ofcruises. The more cruises they sell on a particular line, the more “preferred”they are by that line. In addition to the 10 percent base commission, preferredagents are the first to get up to an additional 30 percent or more commission oncertain cruises.

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What do the agents do with these mega commissions? They have three options:1. They may try to keep the entire commission as profit.2. They may act as wholesalers or cruise brokers to smaller travel

agencies, making it possible for these agencies to book fares at ahigher commission rate than if they had booked theirpassengers directly with the cruise line.

3. They may try to sell even more cruises by advertising “specialcruise fares.” lf it’s a 20 percent special discount, the agent maymake 20 percent, and the passenger saves 20 percent. Don’tconfuse these specials with the specials offered by the linesthemselves.

For which cruises do preferred accounts get the largest commissions?With new ships being launched every year, there is a competitive scramble

to sell cabins, and both cruise line and agent specials are becoming more com-mon. The deeper discounts are usually for:

• Spur-of-the-moment specials when it appears several months inadvance of sailing that there will be unsold cabins.

• “Repositioning cruises” (i.e., the segue cruises between seasonalEuropean ports and Caribbean ports). Repositioning cruisescross miles of ocean and hit fewer ports. They are a bargainonly if days at sea are more important to you than ports-of-call.

The Consolidator Game

Consolidators go after the block bookings business of affinity groups such asthe Masons, Rotarians, or alumni associations. Consolidators generally have thehighest profit margins to play with.

To avoid alienating the cruise lines and other travel agents, most consolida-tors won’t negotiate an affinity group fare for anyone who is not a member of thegroup. You can’t get an Elks Club fare if you aren’t an Elk. But consolidators aretoo smart not to take advantage of their volume buying power, and so they formtheir own affinity groups and call them travel clubs. “Club members” pay nominalannual dues to get a shot at bargain fares that may not otherwise be available.

Eight Steps to the Dock

Step 1. Decide Where and When You Want to Go

Study the brochures of different cruise lines. You will be surprised at theirsimilarity—photos of sunny beaches, shipboard entertainers in sequins, couplesstanding on a deck awash in moonlight, and buffets to die for. You will alsonotice a similarity of itineraries and departure dates in various parts of the world.


Decide your destination and a sailing date range. You are now ready tochoose a ship and cruise line.

Step 2. Check Out Cruise Line Promotions and Incentives

Which lines are currently advertising a sale” on their usual fares?Those two-for-one advertised cruise line specials are usually not two-for-

one for the airfare portion of the cruise. You will find this fact buried in thesmallest type at the bottom of the ad.

Call 800 information and get the phone number of the lines whose cruisesinterest you.

Ask each line about special incentives and programs that are not in theirbrochure. What are they offering for your time frames and destinations?

Ask each line which agents have blocked bookings for the special-incentivecruises. Some lines will tell you, others will not.

Step 3. Ask Preferred Suppliers About Their Own

Promotions and Incentives

For years, you have had an agent who books your trips west to see the kidsfor the holidays. But shop around. Buying a cruise is becoming more like buy-ing a car or refrigerator.

In addition to the cruise line incentives, preferred suppliers will have theirown incentives. Give them your dates and destinations and see what theycome up with.

Different agents are willing to offer different concessions, depending onthe relationship they enjoy with any given cruise line. Try out-of-state cruisebrokers that advertise in the Sunday travel section.

Practice alert: if you buy through an agent you don’t know, pay with a creditcard just in case the agent heads south.

Step 4. Negotiate a Super Fare

The basic question to ask your agent is: Are you competitive? No agencystill in business will answer “no” to this question.

Use the power of competition. Let the agent know you believe you can geta better fare elsewhere, although you would prefer to deal with this agency if atall possible. Don’t accept superlative service as an alternative to a deep dis-count. You are buying a ticket—this is not a service-intensive activity. Once yourticket is delivered, the travel agent is pretty much out of the picture.

All travel agents, big and small, who want to be a part of the new, savvy,price-conscious, competitive market will negotiate commissions and price breaks.

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Step 5. Negotiate a Cabin Upgrade

Study deck plans and decide which cabin location best suits your needsand budget. Forget about the status aspect. It’s not a big thing on cruises.

Upper deck vs. lower deck: Here’s the paradox—the smoothest sailing is in thelower decks. The more expensive cabins are on the upper decks.

How is the paradox explained?Status is being close to upper-deck dining areas and bars. With the excep-

tion of very expensive cabins (the ones closest to God and the Captain), mostoutboard cabins (the ones with a window or porthole) are pretty much thesame size.

Interior vs. exterior cabin: If you have an interior cabin, negotiate for anoutside cabin at an interior cabin price. Sometimes the views are wonderful,sometimes they aren’t. But with a porthole at least you know whether to puton a jacket when you meet the tour bus.

Front, back, or in the middle: The best ride on any given deck is amid-ship (inthe middle). If you must deviate substantially from center in either direction,opt for cabins toward the bow (the pointy end). The stern (the blunt end)cabins have more engine vibration and noise.

In addition to a discounted fare, suggest a free cabin upgrade as part of thedeal: The discount you are offering isn’t as much as we had expected. We wouldconsider your proposal if you are able to bump us up into the next cabin category.

Step 6. Negotiate Prepaid Gratuities

Generous end-of-cruise tips to cabin attendants and dining room serversare a must. The amount is so strongly suggested by the cruise lines that, as apractical matter, it’s an obligatory hidden-cost extra.

As a negotiating perk, travel agents will often pay these suggested gratuitiesfor you. Many cruise lines add the tips to your shipboard bill. Those tips arepooled and allocated to the entire service crew rather than selected individuals.You have to tell the ship’s purser to delete the tip charge so you can hand cashin an amount chosen by you to folks you have chosen to reward.

Step 7. Negotiate Shipboard Allowances

Another perk worth negotiating for with the travel agent is prepaid ship-board spending allowances good for bar tabs, shore excursions, and other ship-board extras.

Why would a travel agent sponsor a cabin upgrade, gratuities, and allow-ances in addition to a fare discount?

The cruise lines may make these perks available to your agent by way ofpass-on promotional incentives.


Fare discounts have to be big numbers to make an impact on a potentialpassenger. Less-costly incentives in kind—upgrades, tips, allowances—can be morepsychologically enticing. You know the syndrome:

It’s hard to get excited about winning $50 cash, but winning a dinner fortwo worth $50 has a special impact all its own.

Step 8. Now Is Not the Time to Buy Shore Excursions

Do not book port-of-call shore excursions in advance.Is the excursion just a bus trip to a site that doesn’t need a historian’s long-

winded narrative? If so, you will generally save money and time by grabbing afew other passengers and hiring a dockside taxi. You can always book the ex-cursion on the ship. To find out if the taxi idea makes the most sense, ask theship’s concierge, not the on-board shore excursion salespeople who are oftenindependent concessionaires.

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Debt

Negotiating Your Way Out of Debt

Just about every occupation, profession, and industry imaginable has expe-rienced financial distress in recent years.

I have filed more chapter 7 and chapter 11 cases for clients in crises than Ican recall. And I have fought to preserve the rights of creditor clients whenothers have sought the sanctuary of the bankruptcy courts.

The insights that follow are firsthand, direct from the trenches.

Step 1. Delays Are Costly

Negotiate debt problems before they are turned over to a collection agencyor lawyer. It is harder to negotiate with a creditor when someone else is gettingup to 50 percent of what is collected from you.

Step 2. Swimming Through Mud

Your creditors have heard them all:• If I get this new job, I should be able to pay you something in 60

days.• We have cut operating costs and will pay our bills soon.• We have increased our advertising and will pay when the new orders

start to come in.• I am trying to find a financial partner.

Reality check: Most people in financial crisis are not able to turn things aroundwithout having their debt reduced. Debtor tactics to delay creditors are justthat—a delay of the inevitable.


Want to make your pennies-on-the-dollar debt reduction offer attractive?Let your creditors know in an unthreatening way that unless something can beworked out you have no apparent alternative to filing bankruptcy. That reality andthat alone is the greatest single source of your negotiating leverage.

It works.Every day, banks take major hits in loan settlements. American Express,

Visa, and Master Card debts can be settled for a fraction of what is owed if youare credible, are prepared to prove you are tapped out, and have no clear prospectiveability to pay.

• The “credibility” factor: Made-up excuses for nonpayment (“defec-tive goods” or “late delivery”) sound just that way—made up. Theybring emotions into play and make principled creditors less in-clined to settle. Cry poverty later on and your veracity will besuspect.

• The “prepared to prove” factor: Your offer to supply financial infor-mation without being asked will shore up credibility lost throughunkept promises of payment.

• The “tapped out” factor: “Tapped out” doesn’t mean living-in-the-park destitute. It suggests that if you were forced to file bank-ruptcy, that creditor who is hounding you would receive little ifanything.

• The “no clear prospect” factor: It is not enough to be tapped out ifyou are starting a big-bucks job next month. Your settlement le-verage is highest when your future prospects are lowest.

Step 3. It Ain’t Fudging

You may call it “fudging.” The courts call it fraud.Desperate people do stupid things. Loans induced through false financial

documents may not be excused in bankruptcy. Super negotiating power flowsfrom the possibility of bankruptcy and the discharge of your indebtedness. Thispossibility is lost when false financial documents are part of the scenario.

So what’s left if you need money?

Step 4. Don’t Be Quick to Borrow

From Friends and Relatives

You can unemotionally negotiate a debt-reduction settlement with a stranger.You will feel emotionally obligated to repay friends and relatives in full, nomatter what.

People in crisis borrow to keep a dying business alive a little longer. Throw-ing good money after bad is the alternative to admitting failure to themselvesand to others.

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If you do borrow from family and friends, collateralize those loans by givingthem security: a lien on a house, car, or other lienable property in which youhave equity (a residual value after deducting other liens against that same prop-erty).

Liens will enhance a favored lender’s chances of repayment.

Practice alert: Liens that are not filed or recorded at the time the loan isfunded are in jeopardy of being stripped away in a bankruptcy proceeding.

Step 5. Spend Wisely

Use available funds to pay obligations that can’t be legally excused in abankruptcy or readily discounted through negotiation. These include retail salestaxes, employee withholding taxes, and income taxes due on returns filed lessthan three years before the bankruptcy.

Step 6. Bad Idea

Giving your creditor a postdated check is generally a bad idea. It’s a no-winsituation.

• If there are insufficient funds to cover the check on the day it isdated, you will be facing criminal prosecution. Your negotiatingleverage will never be lower.

• If you stop payment on the check to prevent it from being“NSF,” you will have angered the creditor, making it harder tonegotiate.

Step 7. Guarantied Trouble

Is there insistence that a family member or friend guaranty your obligation?You may not want to agree to this suggestion. Guaranties are designed to stripaway negotiating power. Any settlement leverage created by your personalinability to pay and possible bankruptcy will be lost because of the guarantor’scommitment and ability to pay your debt.

Step 8. A Note of Caution

Creditors to whom you owe money on open account may ask that yousign a promissory note. It will be harder for you to negotiate a settlement onceyour debt has been memorialized in a note because:

• A note will preclude you from future nonpayment defenses basedon defective goods, late delivery, or misrepresentation.

• A note, unlike open account debt, will provide for the reimburse-ment of creditors’ legal fees if suit is brought and they win.

• A note enables a creditor to receive interest—or more interestthan would otherwise accrue on an open account.


Step 9. Untapped Negotiating Power

An unsecured lender or trade creditor who is paid on a previously existingdebt must disgorge the funds received within 90 days of a bankruptcy filing, insome cases, that 90 days is extended to a year if the creditor is a close friend,relative, or “insider.”

If you have made partial payments to a creditor within the past 90 days,you have the negotiating power to settle the balance of your debt.

Why? Because if you were to file bankruptcy, that creditor could be forcedto disgorge the money previously paid. Call it settle-now-on-the-balance-or-be-forced-to-give-back-what-you-have-already-gotten power.

Step 10. The Preference Trap

There will be a temptation to pay some creditors but not others. Everyindustry is a small industry, and the word will get out. When others find thatsqueaky wheels are being paid, they too will squeak.

Creditors who feel they are being given short shrift while other creditorsare being paid may be motivated to drag you by the ankles into an involuntarybankruptcy. Why? Because only in a bankruptcy context can a preferentiallypaid creditor be ordered to turn over what has been already paid.

Step 11. Preserve Your Future Credit

If a debt is settled, negotiate with the creditor as to how the creditor willreport the debt to credit reporting services such as Equifax, Experian, and Dun& Bradstreet. If the debt was paid for pennies on the dollar, request that it bereported only as “paid,” with no additional detail.

Step 12. How to Get Faster Delivery Than the Customers

with Good Credit

If you are forced to pay COD for goods to stay in business, it is best to buyfrom suppliers to whom you already owe money.

Few things irritate a supplier more than watching someone who owesthem a bundle giving cash business to a competitor.

Consider this: Offer that creditor 105 percent of the COD purchase pricefor new goods, with the extra 5 percent being applied to the old debt. Yoursupplier will be encouraged to keep you in business, and, if it comes down to achoice, who do you think will get merchandise first: the customer paying 105percent cash or the customer paying 100 percent on terms? Case closed.

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Divorce

Negotiating a Divorce

The trend of divorce courts is to encourage or require that battling spousestry to resolve issues through mediated negotiation before going to the economicand psychological expense of a protracted trial. Most states have now mandatedthat the parties try to reach a mediated outcome in child custody disputes.

This trend toward mediated negotiation presents a unique opportunity.Through negotiation, you can shape the outcome you want rather than havingthat outcome determined unilaterally by a judge.

Step 1. Consider the Tactical Advantages

of Mediated Negotiation

Mediators are not decision-makers.They are nonadjudicative problem solvers. Unlike judges, they are present-

ers and testers of alternative creative solutions. They are facilitators who helpthe parties negotiate their own joint face-saving decisions.

Controlling the divorce process is different from trying to control yourspouse and kids.

If mediated negotiation will best advance your goal, encourage its use. Here’sthe pitch that will make it enticing:

• In a trial, one of the spouses is bound to be disappointed. Anoutsider, rather than the negotiating parties, decides the outcomeof a disagreement.

• Trauma, anxiety, and uncertainty are associated with a trial. Theycan be avoided in mediated negotiations.

• A joint decision of the spouses can, with the consent of the par-ties, become as binding as a court determination.


• Decisions made by the parties themselves, in mediated negotia-tions, are emotionally easier to live with. These decisions are lesslikely to evoke retaliation or avoidance maneuvering than aredecisions forced on them by an outsider.

• Mediation prevents intimate marital details from being discussedin a public courtroom.

Assume that your spouse agrees that mediated negotiations make sense.

Step 2. What Type of Mediator Will Best Serve Your Needs?

Determine the major areas of contention.Mediators can be independent lawyers, therapists, family counselors, or

businesspeople. Decide the principal issues to be dealt with, and then encour-age using a trained mediator who can best understand and serve your needs.

If the issue is child custody, then a therapist or psychologist makes moresense than a businessperson. If the issues involve determining the value andgoodwill of family businesses, then an accountant, banker, or businesspersonmay be most effective.

Step 3. What Mediation Personality

Will Best Serve Your Needs?

Mediators are people. How you influence them will in turn influence theresult they are trying to “objectively” achieve.

• Is your spouse easily intimidated or influenced by signs of authority?Consider a mediator with an aggressive personality who will ram-rod home the negotiating result you want.

• Is your spouse more likely to be influenced by reason? Consider amediator with a more low-key personality who will be better ableto guide and direct negotiations toward your settlement goal.

• Is your spouse more likely to capitulate if the mediator is empathetic? Amediator, unlike a judge, can be sympathetic and allow a freeexpression of feelings. Often, this pressure release can lessen fes-tering animosity and enhance the possibility of your negotiatingan accord.

Negotiating alert: Mediators, though neutral and unbiased, are businesspeoplewho may subconsciously favor the side that suggested hiring them.

Step 4. Do You Want Lawyers Present

at the Mediated Negotiations?

The answer is yes if:• Your spouse’s lawyer is more objective and reasonable than your

spouse.

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• Your spouse’s lawyer is able to control your spouse’s exhibitionsof aggression, hostility, or anger.

• The issues are so complex that a lawyer will be necessary.• Your spouse’s lawyer has a reputation for cooperation.

The answer is no if:• Your spouse’s lawyer has a reputation for aggressiveness and bel-

ligerence, or has a win—lose persona.

Step 5. Do Not Appear Too Accommodating

in an Effort to Placate the Mediator

Mediators are more likely to seek negotiating concessions from the moremalleable party.

Step 6. Preserve an Aura of Mutuality

Try to match your spouse’s significant concessions by what appear to beyour seemingly reciprocal concessions.

Step 7. Justify Your Proposals

Whenever possible, supply the mediator with a rationale that can be usedto convince your spouse of the reasonableness of your proposal.

Step 8. Consider the Benefit of Procrastination

Lengthy mediation sessions may break down a recalcitrant spouse. Thefatigue factor frequently causes people to become more yielding.

Negotiating tips:• Support and alimony are generally based on present income. If

you are going to file for a divorce, do it when things are about asbad as they will get.

• Want a bitter spouse intent on revenge? Then clean out checkingand savings accounts and cancel all credit cards.

Consider leaving your spouse with half the cards but re-moving your name as a responsible party. As for that bank ac-count, leaving a reasonable amount of money in the account foryour spouse will pay off in later negotiations.

• Tax, legal, and bankruptcy considerations are associated with thecharacterization (spousal support/alimony, child support, prop-erty settlement) of payments made by one spouse to another.Seek professional advice in negotiating the characterization ofmonetary obligations.

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Employees

Negotiating Tips for Employers

I like hard work. Especially when I’m paying for it.

Here’s a lab experiment every employer should try.Required: Two young children and a handful of nickels.Part One: Offer one of the children the choice between taking a stack of

three nickels or a stack of five nickels. Any child, in a heartbeat, will surelychoose the stack of five.

Part Two: Offer a stack of three nickels or a stack of five nickels to the samechild. Tell the child that if he chooses the stack of three, the second child in theexperiment will also get three nickels, but if he chooses the stack of five, thesecond child will receive ten nickels.

Analysis: What would the result be at your house? Would your child definewinning as absolute or relative gain?

One of our law firm’s senior staffers was thrilled about her annual raise allmorning and depressed about it all afternoon. During lunch, she discovered thatanother very valuable but newer employee had also been rewarded with a siz-able, although smaller, salary increase. The fact that there was still a big salary gapbetween the two wasn’t as important as the closeness in the raise differential.

Most of us are secretly envious—or perhaps resentful—of a coworker whoexperiences unusual financial good fortune. And why not? People gauge theirown success by comparisons. How we are doing is not always an absolute, but is oftenrelative to the success of our peers and fellow employees.

Consider this: Mega-raises for your company’s superstars become ascertainablegoals for your other employees to shoot for.

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Employees 193

Step 1. Negotiate Terms of Separation

When Ed resigned from his position, he gave himself one heck of a goodbyegift: the company’s plans and processes; supplier and pricing information; presentand prospective customer lists—a goodly part of the company’s ongoing valueand the result of his employer’s 20-odd years of sweat, sacrifice, and risk-taking.

People are funny. Employees who wouldn’t be trusted to repay a $5,000loan are handed the keys to “the vault.” They are given ready access to theproprietary and confidential information that sets a company apart from therest.

Employers often focus their negotiations on what the employee will get:vacations, perks, insurance, or whatever. They should be negotiating what theywill get from the employee. This is especially true when trade secrets are at risk.

It is NEVER TOO LATE to negotiate—as part of, or independently of, anemployment agreement—what a “trusted employee” can no longer do whenthat employee is fired or walks.

• Negotiate that company trade secrets cannot be given to others orused by the employee during or after job termination.

• Negotiate that the company’s customers’ names, processes, plans,prices, lists, formulas, methods, software, suppliers, and informa-tion about other employees are all trade secrets. Unless tradesecrets are defined between the parties, there is a possibility that acourt will not construe them as such after termination.

• Negotiate how and in what ways a former employee can com-pete. Define “competition” and negotiate what would not be per-missible in terms of conduct (can’t sell wholesale medicalequipment), specific geographic area (in the state of Nevada), andtime frame (for two years from the date of termination).

Practice tips:

• “Anywhere, anytime, anyway” restrictions are so broad that they may bedeemed by a court as unconscionable or overreaching and thereforenot enforceable. Tell a software engineer that, for two years followingher termination, she can’t get near a computer, and you are prohibitingher from making a living in the only profession she knows.

The broader the exclusions, the more likely the employee willnot abide by them and the more likely a court will not enforce them.

• Check the baggage: Find out what restrictions from a former job theemployee-applicant with whom you are negotiating is bringing to yourcompany. That knowledgeable, well-connected salesperson may beuseless to you unless you are planning on opening Iceland as a newmarket.


Step 2. Consider Whether to Negotiate an

Employment Contract

Are your company’s best interests served by not having an employmentcontract?

Here are some thoughts pro and con:Pro: Employees who are secure in their jobs perform best and have a greater

sense of commitment to their employer.Con: The company is obligated to a salary commitment even though the

employee is no longer needed OR is not performing as well as expected ORthe company can no longer afford the employee.

The employee can walk at any time. A contract can physically tether theemployee to the job, but an employee who doesn’t want to be there willalways be a liability.

Step 3. Beware of the Sayonara Syndrome

It has happened to every employer: a valued employee announces a de-parture for another job and a lot more money.

Here is what not to do: Match the other company’s offer. In so doing, youcreate a pseudo-auction negotiating environment. Other employees will bringin offers, hoping those too will be matched or bettered.

Here is what to do: Ask about the departing employee’s long-term careerplans. Although he or she may get more money elsewhere next year, or maybethe year after, explain the long-run advantages of the career-building opportu-nities you have to offer.

Point out that “hire-away” big bucks salaries don’t always increase as hoped.Ask:

• Have you considered the chances that the new employer may not bearound in a few years?

• Is the “hire-away” salary the price being paid for competitiveinformation which, once divulged, will lessen your value?

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Family and Friends

Tips for Negotiating With

Family, Friends, and Partners

Preserving special relationships can be more important than driving homea hard bargain. The key is in being an “I win—you win” negotiator without beinga wimp.

Betty wants to spend her vacation in Hawaii.She has been looking forward to spending endless hours on a beach. She

can’t wait to indulge herself with good food, a high-rise luxury hotel, entertain-ment, and dancing. Betty has no intention of packing and unpacking every dayof her vacation. When she isn’t shopping or carpooling, Betty’s job keeps heron the road. Staying put for a while sounds wonderful.

Her husband, Bill, has had too many business lunches and dinners, andgourmet dining isn’t that important to him. Sunshine is great, but Bill’s derma-tologist has told him to limit his hours under the rays. Big luxury hotels are tooreminiscent of the building housing his offices. He already spends too muchtime waiting for elevators. Hula dancers and swaying palms have their place,but he would like his vacation to be an educational and cultural experience.Besides, Bill has been tethered to his desk. Stretching out sounds pretty good.Driving through Italy would be Bill’s ideal vacation.

The arguments between Bill and Betty have become more heated as sum-mer approaches.

Betty says that she would consider Italy if Bill’s mother does not move inwith them for three weeks in December.

Bill would consider Hawaii if the sewing room was converted to an officewhen they redecorate the house.

Betty and Bill have become literalists.


Each is taking the other’s requirements at face value, making demands,counterdemands, and conditional concessions. Literal demands, not true inter-ests or needs, have become the focal point of their attention and energies.Betty and Bill are engaged in a one-dimensional tug-of-war. The winner of theircontest of wills will be the spouse who pulls the hardest.

It is a behavioral truth that people become committed to their stated posi-tions, their announced points of honor. Egos and personalities are wrongfullysummoned into play when defending those positions becomes a matter ofpersonal pride and self-esteem.

Could either Betty or Bill be a winner by forcing one position down theother person’s throat?

If Betty were miserable in Italy, would Bill really enjoy his well-earnedvacation?

Betty and Bill fought over their stated positions. Tunnel vision preventedthem from identifying or reconciling their compatible needs or interests.

Instead, Betty and Bill can use their energy to create ways to collectivelygain rather than to defend and assert a demand or a position. This is the art ofoptimization.

Step 1. Ascertain the Other Person’s Interests and Needs

The other person has underlying needs, desires, and concerns of varyingdegrees. Some of these needs will be apparent and some will be hidden.

Your continuing inquiry will be welcome. How can there be antagonismtoward you when you are trying to understand the other person’s needs?

Step 2. Communicate Your Concerns, Fears,

Needs, and Wants

Letting the other person know where you are coming from lessens thechance that you will be misread. This doesn’t mean telling all. It means givingthe other person important information if an optimizing solution is to be reached.

Step 3. Focus on Interests That Are Compatible

Betty and Bill are confronted with a very basic choice: to emphasize theirareas of conflict or to emphasize their compatible interests.

Betty and Bill’s stated positions are geographically a world apart—Hawaiiversus Italy. They have individual interests to support their respective vacationpositions. But just because Betty and Bill’s positions are dramatically opposeddoes not mean that all their needs and interests are opposed.

Betty and Bill’s compatible interests are:• Going on vacation and getting away.• Sharing a vacation they can enjoy together.• Going a long way geographically from home.

Family and Friends 197

• Being gone about two weeks.• Having a vacation that would be relaxing and would revitalize

their spirits.• Not doing anything that would harm their relationship.

Step 4. Turn to Interests and Needs That Are in Conflict

Deal with conflicting interests in piecemeal form, a bit at a time.Break big problems into component problems that can be reckoned with

individually.Separate monetary and nonmonetary segments and discuss nonmonetary

issues first.Betty and Bill’s conflicting interests are:• Endless hours on the beach versus sightseeing.• A big luxury hotel versus no high-rise building.• Entertainment, dancing, and fine food versus a cultural

experience.• Staying in one place versus being on the go.

Step 5. Balance Conflicting Interests and Needs

Separate vacations together?Betty and Bill’s conflicting interests could be balanced with a Mediterranean

cruise. Betty would have the luxury and amenities offered by a hotel; Bill wouldnot be reminded of the 26-story building housing his office. Fine food anddancing are available on the ship. Betty could sun while Bill toured classicalruins on the Greek Isles. Betty would not be put to the task of frequent packingand unpacking.

Perhaps the Mediterranean cruise would have been neither Bill’s nor Betty’sfirst choice. Other balanced alternatives could be explored, such as staying at asmall hotel on Italy’s coast, where they could spend part of the time on thebeach and part of the time touring.

When my workshop students are first presented with Betty and Bill’s di-lemma, more than 90 percent of the proposed solutions suggest separate vaca-tions, a week in Italy and a week in Hawaii, or a biennial choice by each spouse.

Long-term or short...business or family...whenever any relationship is atrisk, consider optimizing possibilities. That consideration, that thought, that flex-ibility of determination is the essence of the art of optimization.

PB

Franchisors

Tips on Negotiating With Franchisors

One out of every 12 business establishments is a franchise. A new franchiseopens every eight minutes of each business day.

Here is what you need to know and what you need to do, if you areconsidering joining this trend.

Step 1. Evaluate the Three Cs

Ever hear of Victoria’s Bakery...Sun Studio...Your Attic…PlayfulParenting...or Send a Cookie International? They are a few of the franchisesthat didn’t make it.

According to a university study, 38 percent of franchise units sold failedover a four-year period. 45 percent of retail franchise units lasted less than fouryears.

Where do you begin when there are thousands of franchised businessesspanning 65 different industries? Begin with the three Cs: the Company, theCustomer, and the Competition.The Company

Basic misconception: Running a franchise means finally owning your ownbusiness and being your own boss.

Basic reality: You’re just leasing a trademark. The real boss is the companythat sold you the right to use their trademark. Everything you do will be dic-tated from the second you turn the key in the door each morning.

• What are the company’s objectives, vision, and values?• Does the company have the talent, capital, and facilities to

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Franchisors 199

• What are the company’s strengths and shortcomings?• Is growth needed for the company to fund national advertising,

develop new products, or retain key executives?• Does the company have growth strategies other than

franchising, such as sales in supermarkets, company-ownedstores, mail order?

The Customer• What is the market for the company’s products and services

now and tomorrow?• Is the customer base definable by gender? Ethnicity? Age?

Geography? Education?• How will you approach the market? If it is a service business,

can you “sell” both yourself and your service to others?

The Competition• Is the company’s major competitor gaining or losing market

share?• What are the competition’s strengths and shortcomings?• In what ways do competitors’ products and services differ?• How will the company be able to maintain or increase its

market share?

Step 2. Disclosure Document Alert

Federal law mandates that, as a potential franchise purchaser, you must beprovided with a Uniform Franchise Offering Circular (UFOC) in the FederalTrade Commission (FTC) format before any money is paid.

A UFOC describes the company, its franchisees, working-capital require-ments, pending litigation, and franchise obligations such as equipment, signage,leases, insurance, preopening purchases, site selection, and advertising. The in-formation and details in the UFOC cannot differ from what is in the franchiseagreement to be signed.

The UFOC is only a place to start. A UFOC does not signify that any stateor federal authority approves or recommends the franchise investment.

The franchise business could be selling sand in the desert, but if the re-quired information is in the disclosure document, the franchise offering wouldbe in compliance with federal law. The information presented in the disclosuredocument is not verified by any governmental authority. Franchisee suits alleg-ing that disclosure documents presented false or misleading information arenot uncommon.

Most state laws and the FTC rules are disclosure-oriented. As such, they aresolely designed to ensure that prospective franchisees have the data needed to


make informed decisions about franchise opportunities. Often, there is little, ifany, regulation of the ongoing franchisor—franchisee relationship.

A successful prototype doesn’t guarantee a successful franchising system.The skills needed to operate a franchising system are very different from theskills needed to operate a single store or restaurant.

If you are looking at the earnings claims of prototypes (one or two company-owned stores), then consider:

• How do the locations of those stores differ from yourprospective unit in geography, climate, and demographics?

• Did it take years to build the company store’s customer base toits present size?

• Is much of the company store’s success attributable to thepersonality or special ability of its operators?

Step 3. Talk to Former Franchisees

Disclosure documents will list people in your state who have voluntarily orinvoluntarily terminated their franchise. Don’t accept the franchisor’s explana-tion, “They could have succeeded if they had tried harder.”

Locate these former franchisees. Listen to what they have to say abouttheir negotiating experiences and negotiating successes with the franchisor.

• Did the franchisor modify the standard agreement?• Did they lose money when they sold their business?• How were they dealt with, both before and after entering into

the franchise agreement?• What did they like and dislike about the operation?

Step 4. Talk to Present Franchisees

Ask about their negotiations with the franchisors, their frustrations, theirconcern for the future. Would they still have invested in the franchise if theyknew then what they know now?

Work at a franchise store for a few weeks, even if it means being an unpaidvolunteer.

Step 5. Negotiate the Franchise Agreement

Franchisors don’t sell franchises. Franchisors grant licenses allowing others touse their well-known name, operating system, and support system for a definedperiod of time. The controlling and operative document is the franchise agreement.

Franchisors will tell you that, to preserve continuity, franchise agreementswill usually be identical for identical groups of franchises during any given timeframe. Most franchisors will, however, deviate to some degree from their stan-dard agreement despite the fact that their disclosure statements project an im-age of strict uniformity.

Franchisors 201

Negotiating tips:

• Franchisors in a start-up time frame will almost always be more flexiblein negotiations than a well-established operation.

• Explore with the franchisor the ways in which your franchise wouldnot be identical to its other franchise units. For example:

a. Will your unit be located in a ski area, where you can conductbusiness profitably only during the snow season?

b. Will your unit be in a complex that is open only on certain days orhas restricted hours of operation?

c. Will your unit be smaller than that of the company’s other franchisees?

• Show that changes to the standard agreement were made for presentor former franchisees.

To preserve the quality and consistency of its products and services, afranchisor tilts franchise agreements in favor of itself. Be alert to agreements thatare so slanted that you can later be unfairly treated.

Following are some of the issues you must consider—and, if possible, negotiate.Territory

• Are the territorial boundary lines clear? Can the franchisoropen a company-owned store in “your” territory? Or placeanother franchise unit so close to you that it will impact profits?

• Can the franchisor sell its products in “your” territory throughnonfranchise outlets? (For example, is the company’s ice creambeing sold in supermarkets?)

• “Exclusive” territories are not truly exclusive. Antitrust lawspermit franchisees outside your boundaries to sell to customerswithin your boundaries.

• If the exclusivity of the franchise territory is expressed in miles(for example: No other competing unit will be installed within threemiles), does that mean as the crow flies (preferable) or road-distance miles?

Financing Assistance• Who is providing financing? A franchisor’s promise to “assist” in

obtaining financing may mean nothing more than help incompleting loan applications.

• If the franchisor is providing the financing, what will be theterms? What collateral and/or guaranties will be required?

Site Selection• Can you turn down a prospective site selected by the

franchisor? Will the franchisor assist in site selection? Or will thefranchisor just approve or disapprove your selections?


• Does the franchisor have its own site-selection staff or does itemploy local brokers? Local brokers may be familiar with thereal-estate market, but may not have the “feel” needed to select asite that will make your unit a success.

• Will the franchisor guaranty your lease in order to assist you innegotiating the best possible lease terms?

Site Development• Who will build out your location?• Will the franchisor’s plans be generally accepted by your local

building department?• Are there local building ordinances or other prohibitions that

impact architectural style? Signage? Build-out elements essentialto the franchise’s image and ready customer identification?

Royalty Fees• Can royalty payments be raised later? If so, how and when?

Training• Visit the franchisor’s training facilities. Are they what you expected?

How comprehensive is the training program? What are the quali-fications of the people conducting the program?

• Who bears the expense of travel and lodging during training? Canadditional people from your franchise unit attend training? Atwhat cost?

• Is there a requirement for periodic retraining? If so, at whoseexpense?

Standards of ConductOperating standards are often expressed in vague terms: “Courtesy,” “Clean-

liness,” “Adequately Staffed.” Be aware that a requirement for “refurbishing” (atyour expense) can mean changing roof colors or picking up the tab for installinga new look mandated by the franchisor.

Operating manuals are often no more specific. The results can be a differ-ence in expectations and franchisor complaints that you, the franchisee, are notin compliance.Advertising

Advertising is an area where franchisees are often unfairly treated. Each ofthe following questions should be considered critical:

• Can advertising obligations be changed by the franchisor fromtime to time?

• How much must you spend on local advertising? What type ofadvertising? How frequently?

• How much must you contribute to the national advertising campaign?

Franchisors 203

• Will the franchisor spend all of the money that franchisees con-tribute within the year it is collected? Will excess funds be re-funded or spent the following year?

• Is there a franchisor-advertising-fund administration charge? Will thefranchisor supply an advertising fund accounting to the franchisees?

• Will the company-owned stores contribute on the same basis asfranchisee-owned stores?

Purchase of ProductsFranchisors provide product specifications and the names of vendors whose

products meet those specifications. Be aware that the franchisor’s specificationsmay be so restrictive that no products other than the franchisor’s own or thoseof a favored vendor will be acceptable. In that situation, franchisees can becharged unfairly.Audits

Find out how often franchisees are audited by the franchisor and whopays the auditors.Managerial Assistance

• If you need help, will the franchisor provide assistance? At what charge?• Who will bear the expense of travel or lodging for out-of-town help?

Assignments and Right of First RefusalIf you sell your franchise, your successor will in all likelihood have to be

approved by the franchisor. Ask about clear criteria for the approval of yoursuccessor or whether rejection can be arbitrary.Renewal

Franchise agreements typically have terms of 10 to 20 years. They areoften nonrenewable or are renewable at much higher royalty rates.

• Do you have the absolute right to renew? On the same termsand conditions as before?

• If renewal is not allowed, what will you be paid when thefranchisor takes over your business?

If the price to be paid is the book value of your business, there is a goodchance you will be shortchanged. Most successful businesses are worth muchmore than their book value.Right of Relocation

• If your site or territory isn’t as successful as you expected, canyou “move” your franchise to another site within the territory orto another territory?

• Will there be a relocation fee?Death or Disability

• Does the franchisor have the ability to acquire your business inthe event you die or become disabled? If so, at what price?(Remember, book value is seldom reflective of true worth.)


• If the franchise can be passed on to a family member upon thedeath of the franchisee, is that family member obligated to sellwithin a specified time period?

Termination• Under what circumstances can the franchise be terminated?• Are elected franchisees part of a panel that will determine

whether termination is justified, or will the decision be left tothe franchisor alone?

• What rights do you have to appeal or contest termination? Towhom is that appeal made?

Covenant Not to Compete• What restrictions are applicable to your future once you are no

longer a franchisee?Will you be prohibited from operating another

restaurant some day, even though your whole life may havebeen spent in the restaurant business?

Dispute Resolution• How are disputes to be resolved? Will other franchisees be

sitting as part of a grievance panel? Is the dispute resolutionmechanism costly or complex?

• Will you be forced to travel out-of-state to the franchisor’shome base to arbitrate, litigate, or mediate?

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House—Purchase

Negotiating the Purchase of a House or Condo

It’s a perfect little three-bedroom overlooking mammoth payments.

Step 1. Prequalify for a Loan

Even though you haven’t found the house of your dreams, now is thetime to talk to your bankers. Tell them the price range of houses you will beconsidering and ask how much you can expect to borrow.

Why jump the gun? Because more deals are aborted over the buyer’s in-ability to get financing than any other factor. With the financing hurdle anduncertainty largely out of the way, a seller will be more apt to grant concessionsto a “prequalified buyer.”

Step 2. Decide Whether You Want a Broker

to Call Your Own

There are two situations when you may encounter the seller’s broker with-out having a broker of your own: at a seller’s open house and at a visit to a newhome model.

Those friendly, informative brokers are not your brokers. They are not yourfriends. They are not your advisers. They have no duty or allegiance to you.

They represent only the seller, and it is their job to extract as much moneyfrom you as is humanly possible. There are no confidences: whatever you tellthe seller’s broker about your income, budget, contemplated opening offer, orcontemplated ceiling must be dutifully reported to the seller.

At this juncture you have two choices:a. You can hire a broker to negotiate for you—free. How’s that?

Sellers pay all brokerage commissions. If there is only a selling


broker, the commission all goes to that one broker. If you alsohave a broker, the commission is split between the two.

b. You can tell the seller’s broker that you plan to get your ownbroker, but if the purchase price is reduced by the amount yourbroker would earn, you will go it alone.

Why would the selling broker do this? The additional discount enhancesthe chances of a deal being made.

But what if you need help? You can hire a broker, or retain a lawyer out ofyour own pocket on an hourly basis, and probably get a more effective result inthe bargain.

Step 3. Don’t Tip Your Hand

On their second visit to the Michaels’ home, Mrs. Black, a lovely lady, inkindness and sincerity said, “Mrs. Michaels, you have such a beautiful home. Wehave looked at houses all week and haven’t seen one we liked nearly as much.”

Guess who had the upper hand in the ensuing negotiations between theMichaels and Blacks?

Step 4. Ascertain Why the Seller Is Selling

• Has a job been lost? Is a company transfer imminent?• Has another home been purchased? Is the seller anxious to

move before the start of another school year?• Is the seller racing to beat a foreclosure auction?

The deal you negotiate will be a function of the seller’s needs and thesituation’s immediacy.

Power negotiating information is readily available from your broker, fromcredit reporting agencies, and from public records. (Unpaid property taxes,lender default notices, lawsuits, or court divorce files may have orders regard-ing the disposition of the house you want to buy.)

Step 5. Ascertain the Seller’s Needs

A meeting with the seller may give you a better opportunity to read theseller’s needs and assess their immediacy. When you know what they are, lookfor creative ways to satisfy them. Here are some examples.

• Psychological Need: We put so much work into the house, I still feel I’munderselling it. Offer a higher selling price but a lower interest rateon the note you are giving to the seller.

• Emotional Need: Whenever I think about this house, I’m going to re-member that chandelier (or favorite item). Offer the seller the right toremove and take a special chandelier or artistic leaded-glass window.

House—Purchase 207

• Convenience-Oriented Need: Even though the house is on the marketwe would prefer to sell after the school year ends. Offer a closing datethat coincides with the seller’s finding and buying another house,finishing a semester, selling a business, and so on.

Step 6. Determine Your Primary Objective

Step back. Take a deep breath.Before making an offer, ask yourself a critical question: Is my primary objec-

tive to get the best possible price? Or the best possible commitment?It was my very first home purchase. My offer was a low 65 percent of the

asking price. For fear of being “embarrassed,” the broker holding the openhouse refused to submit my offer to the seller. After I threatened to deliver theoffer myself, he reluctantly agreed to submit it. Much to everyone’s disbelief,including mine, the offer was accepted.

Yes, I made an extreme offer. Yes, I got an incredible deal. And yes, I tookthe chance of losing the house to someone who may have offered even ahundred dollars more. But there was no scarcity of houses on the market, andmy sole objective was getting the best possible price.

Had the house been one of a kind or had houses been hard to come by, Imay have offered more. To do so would have meant that my objective was notnailing down the best possible price but hammering a commitment from theseller. The extra money paid would have been my “insurance” premium forlessening the chance of losing out.

Step 7. Ask the Broker for “Comps”

A seller’s initial asking price is the seller’s dream price. An asking price may beso far over market that, even when discounted, you would be overpaying.

So what if the guest bathroom has great wallpaper or the kitchen has abuilt-in microwave? You can’t effectively negotiate without knowing the truemarket value of the house you are considering.

Ask the seller’s broker (or your own broker) for “comps”—an analysis showingthe recent sale prices of comparable houses nearby, as well as the asking pricesof comparable houses presently listed for sale. By adding or subtracting thedollar value of the positive and negative features of the house you are consid-ering, you will get a good idea of its true market value.

Step 8. Go Ahead, Change the Printed Form

Brokers have a disincentive to:• Get you the best possible price: the more you pay, the more

they are paid by the seller.• Make waves that may kill the deal: they get paid only if the deal closes.


• Have you pick the escrow, title company, inspection service, or mort-gage broker: these indispensable folks frequently give kickbacks andgifts to referring brokers. Who pays for these kickbacks and gifts?You do, through higher prices and rates.

That printed form your broker is using, the Purchase and Sale Agreement,is a “one-size-fits-all” document for use by both buyers and sellers. A universalagreement, by definition, can’t fully serve the best needs of everyone or any-one. Negotiate changes to the printed form so it protects and serves you.

Step 9. Determine Your “Would Likes”

Light fixtures, antenna, draperies, and other items attached to walls, floor, orceiling may or may not be considered a part of the physical house.

What you see is not always what you get. An unattached, free-standing roomdivider or free-standing book shelf, a large hanging hall mirror,a potted tree inthe patio, or a custom-made furniture unit built to fit in a room wall-to-wall,floor-to-ceiling—all may be whisked away by the seller’s moving van.

Determine which unattached items—those that aren’t physically a part ofthe house—you would like to own.

Negotiating alert: Do not include would like items in your initial offer. Sellersalways counter. When you counter to the counter, increase your offer ifthose would like items are part of the deal.

Step 10. Think of a House as a Machine You Live In

What you don’t see is sometimes what you do get—problems. House systems(mechanical, electrical, plumbing, heating/ventilation/air conditioning) and thestructural elements of the house, including walls and foundation, should bedelivered in good condition and repair when the title passes.

Cars come with a warranty. Refrigerators, televisions, and computers do,too. So, why not a house? There is no reason to buy a house “as is” withoutwarranties unless it is a tear-down or a true fixer-upper and your expectation isthat nothing will work and the place could momentarily fall in a heap aroundyour ankles.

Negotiate a seller’s warranty that each system and all structural elements ofthe house are in good condition and repair and that they comply to all appli-cable building codes and safety ordinances.

Practice alert: Review the contract to be sure that the warranty survives andcontinues beyond the transfer of title to you.

Negotiating tip: Negotiate for the seller’s warranty to be absolute (i.e., “Theroof is in good repair and leak-free.”) Most seller’s warranties are not abso-lute but are made only “to the best of seller’s knowledge” (i.e., “To the bestof seller’s knowledge, the roof is in good repair and leak-free”).

House—Purchase 209

Step 11. Negotiate a Right of Offset

Is the seller taking back a promissory note from you as part of the purchaseprice? A right of offset is your right to hold back note payments while negotiat-ing with the seller over who will bear the responsibility for undetected post-closing problems. Be sure that your promise to pay does not sap your negotiatingleverage. Do not state, “I promise to pay without right of offset.”

Step 12. Make a Limited Time Offer

“Offering shopping” occurs when the seller’s broker uses your offer tocoax another prospective buyer to make an offer or to better an earlier offer. Ineffect, the broker is creating an auction environment.

The best way to prevent offering shopping is to make your offer valid for avery limited time. I’ve prepared offers that were open for as little as a fewhours, when I knew the competition for the house would be intense. Longertime frames, 24 or 48 hours, may be reasonable under less-competitive cir-cumstances. Any longer period may be to your negotiating disadvantage.

Step 13. Negotiate the Terms of Notes and Mortgages

Promissory-note and mortgage-document forms are provided by title com-panies or brokerage associations. Like the Purchase and Sale Agreement, theterms and conditions of these printed forms are not immune from your nego-tiated changes.

Consider these changes if the seller is taking back a note from you:• Longer notice-of-default and opportunity-to-cure periods.• Elimination of stepped-up default interest rates.• More lenient penalties.• Softer forfeiture provisions.

Special Tips if You Are Purchasing a Newly Built House

Subdivision developers like to keep prices high. Buyers don’t want to move intoa subdivision only to find their neighbor paid $5,000 less for a similar modelthe month before. Higher prices today ensure higher subdivision appraisals inthe future.

If the builder is resistant to negotiating price, it may be easier to negotiateupgrade concessions such as tile or hardwood flooring instead of carpeting, airconditioning, tile counter tops and showers, landscaping, and all those otherwonderful “designer options” you saw in the model houses.

The builder may be a publicly owned, stock exchange-listed company. If so, it willwant to present Wall Street with the very best sales figures possible.

Publicly traded home builders are more likely to wheel and deal as it getscloser to the end of their fiscal year. To determine the builder’s fiscal year, eitherask the builder or a stockbroker, or check your local library.


The important thing is that your closing (when you take delivery of title)must be before the end of the builder’s year.

Builders who offer designer packages for window coverings, plush carpeting,and the like often charge more than a local merchant would charge for thesame items. If you can beat the builder’s price, negotiate a credit from thebuilder for the standard carpeting, appliances, or whatever the builder won’t beinstalling, and have someone else provide and install the upgraded items.

Look for a builder with standing inventory—homes built in excess of whatthe market will absorb. Standing inventory is expensive for builders to holdunsold. As loan interest, insurance, security, and other expenses accrue, build-ers become more flexible deal-makers.

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House—Sale

Negotiating the Sale of Your House

Step 1. No Contract Is Standard

Read and negotiate the fine print when presented with a printed formcalled a Purchase and Sale Contract. (These contracts are called DepositReceipts in some states. People read contracts, but who reads a receipt?)

Purchase and Sale Contract forms are designed for use by both buyers andsellers. By definition, they can’t fully serve the best interests of either. Never feellocked in by the printed word. Negotiate what is best for you.

Step 2. Consider at What Point You Want

to Be Under Contract

The wiggle room in a Purchase and Sale Contract is always with the buyer.A Purchase and Sale Contract provides that the seller must sell if the buyer

decides to buy after reviewing title, inspecting the house, shopping for financing,and so on.

In a strong seller’s market, consider keeping pressure on a buyer by nottaking your property off the market or committing yourself to a sale until thebuyer has a real commitment to the deal.

Real commitment comes when the buyer (a) makes a sizable deposit and(b) satisfies or waives some of the conditions (contingencies) over which thebuyer has a measure of discretionary control. For example, tell the buyer youwill not sign an agreement to sell until the buyer has first inspected and ap-proved the physical condition of the house.

Or consider, entering into a contract which, for the most part, has veryshort contingency periods. For example, the buyer has five working days toinspect and approve the physical condition of the house.


Step 3. Read the Buyer’s Needs

It may be worthwhile to have a meeting at which the buyer, seller, and brokerare present. By being able to read the buyer’s needs, motivations, and time con-straints, you will be better able to determine the relative balance of negotiatingpower.

Sometimes the buyer’s need for mastery over the negotiating process is moreimportant than the actual dollars involved.

If the buyer is firmly insistent about a further price reduction, considergiving in to the reduction demand IF (tax implications aside) there is a dollar-recouping interest rate hike on the mortgage note you will be taking back, or IFthe buyer will accept the property “as is,” or IF the buyer agrees to an earlyclosing but will allow you to live in the house rent-free for 60 days until yournew place is ready.

Step 4. Change Quarterbacks?

Brokers have a need to be in control and to feel instrumental in making thedeal. Your broker may be caring, charming, and energetic. Your broker may alsobe the world’s worst negotiator. Strategize how you can work as a team. It’syour deal, and it may make sense for you to call the plays personally.

Step 5. Insulate Yourself from the Scottsdale Squeeze Play

The buyers were my clients, and I was embarrassed. But then they werefrom another part of the world and their way was, well, their way. The deal Inegotiated was for the purchase of a palatial home outside of Scottsdale. Thecontract called for a $10,000 cash deposit. There was a standard liquidated-damages provision allowing the seller to keep the deposit in lieu of a suit, in theevent my clients breached their “commitment to buy.” Title was to transfer infour months. To me, it was a done deal.

My clients stood on the sidelines as the seller bought a ranch in Montana,made arrangements to move his mother to a convalescent facility in Montana,enrolled his kids in a Montana school for the fall semester, forwarded medicalrecords, and generally got ready for an anxiously awaited move north.

Then the bomb dropped.My clients decided that the house was too expensive. They weren’t going

to close. The buyers were prepared to say good-bye to their $10,000 deposit.As predicted by my clients long before, the panicked seller whose life had

been rearranged had no practical choice other than to once again discount hisselling price for a timely close.

Here is what I learned later. The buyers were not risking their deposit. Hadthe seller said no to their demand for a further concession, the buyers wouldhave proceeded to close anyway.

House—Sale 213

Insulate yourself from the Scottsdale squeeze play. Negotiate an escalating deposit—lower at first, if necessary to encourage the buyer to sign the sale agreement, butquickly increasing as inspections are made and title reports are reviewed.

Make sure the increased deposit is large enough so that you, the seller, arereasonably protected and the buyer feels very committed to your deal.

Keep contingency periods for inspections, studies, approvals, or financingas short as possible.

Step 6. Inventory Your Negotiating Chips

Furniture, area rugs, outdoor planters, a large hanging mirror are more thanthings that “make the house.” They are negotiating chips in ensuing buy—sellnegotiations. Rather than lowering the price, consider “throwing in” furnitureand decorative items, or anything that would cost a buyer money.

Step 7. Discourage Delays

Real estate deals seldom close on time. Discourage delays by negotiating aprice increase in the event of a delayed closing.

For example: The sales price shall increase by the equivalent of 10 percentsimple annual interest from the date of scheduled closing to the date of actual closing.Tax prorations shall be as of the scheduled closing date rather than the date of actualclosing.

Step 8. Prevent Note Offsets

Taking back your buyer’s note as part of the purchase price? Negotiate thatthe note states the buyer’s promise to pay you is without right of offset. An offsetright is the right to withhold or reduce note payments. A buyer with a right ofoffset can withhold note payments long after closing, while squabbling overwho is responsible for replacing a leaky roof.

214

Insurance Claims, Auto

Negotiating Automobile Insurance Claims

Step 1. Negotiate Which Shop Will Do the Work

Chances are your policy does not require you to:• Obtain two or three estimates.• Drive the car into a drive-in claims service.• Use a body shop chosen by the insurance company.

If you are requested to do any of these things, insist that you be shownwhere in your policy it is required.

The contract to have repair work done is between you and the shop. Theinsurance company will not guarantee the shop’s work. If things aren’t right,you will be dealing with the shop, not the insurance company. It makes senseto go to a shop where you will get a minimum of aggravation and the bestpossible job.

Shops recommended by an insurance company are the ones that give theinsurance company a discount in exchange for a high volume of repairs. Theyaren’t necessarily the shops that will do the best job.

Start off at a drive-in claims office, and the adjuster will encourage the useof an insurance company’s “captive” shop.

The best way to negotiate having the shop of your choice do the work is tostart off by driving or having your car towed to that shop and leaving it there.Call your insurance company and tell them to inspect the car at your chosenshop and to make a repair deal with that shop.

What happens if the repair estimate of your chosen shop is much more costlythan the adjuster’s assessment of the damage? Compare specific differences in the

Insurance Claims, Auto 215

two estimates. Does one have parts being repaired rather than replaced? Re-member, your car must be restored to its predamage condition. Negotiate andjustify your shop’s more costly effort.

If the insurance company is dragging its feet, submit a Proof of Loss state-ment, which is your demand for payment, accompanied by documentationsupporting the amount of your loss.

A Proof of Loss form can be obtained from the adjuster or your insurancecompany.

Step 2. Don’t Be Intimidated

If I were you, I would accept my offer now. If my supervisor has to review yourclaim, she won’t be as liberal as I am.

To save money on adjustment and claim costs, some adjusters will try tocash-out your claim quickly by assessing the damage based on prices supplied bythe insurance company. These cash-out prices are usually lower than the pricesyou will have to pay to have your car repaired at a first-class body shop.

If the body shop fails to meet your reasonable expectations or if it is discov-ered that additional work needs to be done, it is up to the insurance companyto make things right. If, however, you cash out, the insurance company has nofurther obligation to you.

Step 3. Negotiate Betterment and Depreciation

Because of a sandstorm, your 4-year-old car needs to be totally repainted.Your insurance company’s obligation is to put your car back to where it was

just before the damage occurred. With a whole new paint job, your car is inbetter shape than it was just before the damage. Your betterment is in gettingback the 4 years of paint life that had already been used (depreciated) on theday of the sandstorm.

Assume that an average car’s paint job lasts 10 years. Because your car is 4years old, the insurance company will offer to settle for 60 percent of the costof a new paint job. This represents the remaining six years of paint life you lost.

In this example, negotiate that your car was garaged, regularly waxed, and sowell maintained that the paint had a reasonable life of 16 years rather than 10.The 4 years of paint life you used and got back was only four-sixteenths, or 25percent, of a 16-year anticipated life. Accordingly, the insurance company shouldpay for 75 percent of the paint job.

Step 4. Negotiate Value Diminution

How much value has your car lost as a result of being damaged?Would you buy a car knowing it had been badly damaged and repaired?

Even though fully repaired, the value of a car that was in an accident will alwaysbe less than the value of an identical car that wasn’t in an accident. This incre-ment of decrease in worth is value diminution.


How do you measure diminution of value? Ask used car dealers, “Whatcould you have sold my car for, had it not been wrecked and repaired? Whatcould you have sold it for, had it never been wrecked at all?”

Negotiate diminution reimbursement. These negotiations are most success-ful when dealing with the other person’s insurance company. The diminutionargument works best with expensive cars, whose owners are usually concernedwith their cars being in perfect condition. Owners of less expensive, older carsmay only be concerned with the car’s drive-back-and-forth transportation value.

Step 5. Negotiate Total Loss Value

Is your car totaled? The Kelley Blue Book and other value guides are for carsthat were maintained in “average” condition.

There is a big difference between a low-mileage, pampered car and onethat sits outside all year, is never waxed, and is not regularly serviced.

To receive the most for your car, negotiate that it was in far better shapethan the average car of that make and model, and therefore you shouldn’t bebound to the insurance adjuster’s computerized schedule of depreciated “ac-tual cash value.”

Also negotiate to be reimbursed for:• License fees.• Sales, gas guzzler, and other taxes.• Extended warranty premiums you paid on the totaled car.

The amount of your license fee and tax reimbursement will be based onwhat you would have to shell out to purchase a used car similar to the one thatwas totaled. Negotiate your entitlement to this reimbursement, even thoughyou plan to use the settlement money to buy a newer car or go on a PanamaCanal cruise this winter.

Step 6. Negotiate Car Rental

You can get car rental reimbursement from your own insurance companyonly if you have paid a separate premium for it. But if you are dealing with theother driver’s insurance company, then in most states you can negotiate to bereimbursed for rental while your car is being repaired.

Negotiate what is a reasonable amount of time to have a rental car and thetype of rental car.

If you are driving a Cadillac or Lincoln, you are arguably entitled to rent acomparable luxury car. You will get a lot of resistance insisting on a luxury car,but you may very well prevail if you push hard enough.

Step 7. Negotiate Liability

If you are stopped at a red light and someone rear-ends you, chances areyou were blameless.

Insurance Claims, Auto 217

But what if you stopped suddenly before you were hit? You may be partiallyto blame, depending on why you stopped. Did you slam on your brakes becauseyou weren’t attentive to traffic? Or to avoid a child darting into the street?

If you are deemed partially negligent and to some degree responsible, theinsurance company can fault you with a “chargeable accident,” which can resultin increased premiums. Negotiate with the company as to whether you shouldbe considered at fault and whether the accident will cause your premiums toincrease.

Step 8. Negotiate Collision Versus Comprehensive

Collision: the damage done to your car when another car hits you or youhit another car or an inanimate object.

Comprehensive: just about any other calamity that befalls your car—a wind-storm, fire, vandalism.

Your car is damaged by a rock on a mountain road.Did the rock roll down the hill and hit your car? If so, it’s comprehensive loss.Did the rock roll down the hill and stop, and then you hit the rock? If so,

it’s a collision loss.If there is a question as to how your car was damaged, negotiate the charac-

ter of the loss. With a comprehensive loss, there will be either no deductible ora very small deductible. The meeting of car and rock will not go against yourdriving record, and your premium will probably not increase.

Step 9. Keep the Pressure On

Once a Proof of Loss is filed, the insurance company will have a limitedamount of time to accept or reject your demand. Any rejection must be ac-companied by the reasons for rejection.

If you are not satisfied with the reasons given, ask to speak to a claimssupervisor or the president of the company, write to the State InsuranceCommissioner or Department of Insurance requesting arbitration, or do what-ever needs to be done to keep settlement pressure maximized.

Step 10. Do Not Sign a Release If You Were Injured

Were you injured? Don’t tell the other driver’s insurance company of yourinjury until they have agreed to pay for the repairs to your car in a shop of yourchoice and have provided you with a rental car. Once the insurance companyknows you will be making an injury claim, they will want to settle both the propertyand injury claim simultaneously, which will slow down the repair of your car.

Do not sign a release of your personal injury claim until you receive ad-equate payment for that injury claim.

Practice alert: Determine your state’s applicable statute of limitations bardate for filing claims as well as your state’s Department of Motor Vehiclesreporting requirements.


Step 11. The Money Can Go Two Ways

You and your insurance company have agreed on what needs to be done,where the body work is to be done, and how much is to be paid.

Some insurance companies will contract with and pay the body shop. Oth-ers will want to cash out—give you the money and have you contract with thebody shop.

If you cash out, you are on your own. But if the insurance company con-tracts with the body shop and the job isn’t to your liking, you can look to theinsurance company. Negotiate to choose the body shop and to have the insur-ance company contract with and pay the body shop directly.

219

Insurance Claims,

Homeowner

Negotiating Homeowner Insurance Claims

Here’s the latest from Los Angeles:Question: What do riots, fires, mudslides, earthquakes, and ex-wives have incommon?Answer: Eventually one of them will get your house.The good news is that four of the above can be covered by insurance.

Step 1. Don’t Jump the Gun

• Notify your insurance company of your loss.• Read the insured’s duties section of your policy.• Don’t have anyone start working immediately “to minimize loss.”• Have an emergency professional board up the house, or move

your contents to storage if immediate protection is necessary.• Save everything. Do not discard anything.

Tip: If you do any emergency work or cleanup yourself, the insurancecompany will not reimburse you because you did not incur any expense.

Tip: Don’t be hesitant to ask for an advance payment. You are entitled to anadvance for certain services, supplies, and living expenses.

Step 2. Somewhere Out There Is an Expert for You

You can’t negotiate with your insurance company until you know whatneeds to be done and whom you want to do it.

The best remodeling contractor is not necessarily the best homebuilder. Andneither the remodeler nor the homebuilder is necessarily the best contractor todo specialized water, earthquake, or fire damage repair.


Casualty damage restoration experts come from two distinct industries:a. Building/remodeling: structural repair, painting.b. Interior restorers and cleaners: upholstery, contents, carpets,

cleaning, furniture.

The two industries meet at your interior walls. There, the applicable exper-tise will depend on whether those walls are being cleaned or painted.

Determine the appropriate subject matter experts. Talk to various licensed,bonded, and established companies to get a feeling for which ones will bestserve your needs.

Ask restoration contractors:• Can you see their restoration facilities?• Do they use specialized equipment (smoke deodorizers; probes

and meters to locate hidden water damage; dehumidifiers and dry-ers; sewage decontamination and disposal equipment, and so on)?

• Will they guarantee their work, and for how long?Ask all contractors:• Can they produce references from insurance companies,

independent adjusters, and other insureds with similar losses?• Have there been any lawsuits by unhappy customers?

Step 3. Get Bids, Not Estimates

After you have decided which firms best suit your needs, solicit bids fromthe companies that are prepared to do the work immediately.

Request that these bids be specific and detailed. At a minimum, bids shouldbreak down the cost of various types of repairs—painting, cabinetry, electrical,and so on. If possible, break those costs down on a room-by-room basis.

Compare bids to determine why they differ. Are the differences reflectiveof quality? (For example, will heavily smoked or charred wood be scraped orsealed rather than replaced?) Or do they mean that the bidding contractorsviewed the job differently?

Why a bid rather than an estimate? An estimate is nothing more than a guess,and there is no such thing as a precise guess. On the other hand, most bid formsare binding and enforceable agreements once they are accepted by you.

Step 4. Prepare a Proof of Loss Claim

A Proof of Loss statement, when delivered to your insurance company, servesas your offer to settle as well as your demand and your justification for payment.

A Proof of Loss statement sets forth the issues and items that need to beaddressed to resolve your claim: additional living expenses, debris removal,content losses, contractor bids, and so on.

Blank Proof of Loss forms are available from your insurance company.

Insurance Claims, Homeowner 221

A Proof of Loss statement should be as detailed as possible. Show that youexpect to be compensated accordingly by setting forth exact amounts rightdown to the pennies. The more detailed your claim, the more money you willbe paid. Document your loss with photos and/or video.

A Proof of Loss statement enhances your negotiating power in two ways:a. The insurance company is obligated to respond to your request

within a narrow and specific time frame.b. You can demand specific reasons if your claim is rejected.

How not to play the claim game: Agree with the insurance company as to theamount of your loss first, and then sign a Proof of Loss statement prepared bythe insurance company.

How to play the claim game: File a Proof of Loss statement first and negotiatelater.

If the damage is substantial, consider hiring a public adjuster to assist in pre-paring a Proof of Loss statement. Public adjusters are pros who specialize indifferent types of insurance losses and represent victims only.

Alert: Avoid any public adjuster who miraculously shows up on your door-step, or franchise public adjusters with crash-course training.

Step 5. Negotiate Repair and Restoration

Based on photos, documentation, and your Proof of Loss statement, try toreach an agreement with your insurance company as to the extent of repair.

Step 6. Negotiate Content Losses

A content is any personal item in your house that is not nailed down ormade a part of the house.

List lost contents item by item (suit by suit, chair by chair). It will take time tocompile the list and document replacement costs, but it will almost always beworth your effort.Negotiate the Price of Content Items

Unless you have replacement cost coverage, content losses are paid on anactual cash value basis. This means the insurance company has to put you backwhere you were before the loss.

Insurance companies have computer-generated lists showing the cost ofvarious household items. These lists are sold to insurance companies both as aguide and as a printed reference to get you to settle faster. It shouldn’t surpriseyou that the prices on these lists are low. A replacement price schedule is not anonnegotiable authority.Negotiate the Life of Cost Content Items

If you have a 2-year-old Mitsubishi television that was burned, what areyou entitled to from your insurer?


If the insurance company’s depreciation schedule says your television sethad a 6-year life, then the fire deprived you of four more years of televisionviewing. You would be reimbursed two-thirds of the replacement cost becauseyou lost two-thirds (4 years out of 6) of viewing pleasure.

But what if that set was in your guest bedroom and was seldom turned on?A 6-year life expectancy would be too short for a set used so infrequently.

A depreciation schedule is not a nonnegotiable authority. Negotiate that yourtelevision set had a life of 12 years, not 6 years, and that your 2 years of use(depreciation) was not a third but only a sixth of the set’s life, If a replacementtelevision costs $1,000, the difference is whether the insurance company willpay you $833 or $666.

Step 7. Don’t Be Timid or Intimidated

Appearing timid will make you easily compromised by an adjuster whosejob is to close files.

Take your time. Don’t be pressured into accepting an adjuster’s quickiedeal. Once released, the insurance company is out of the picture even thoughthings don’t turn out as you expected.

Step 8. Don’t Allow Adjuster Delays

Many adjusters are freelancers who work for different insurance companies.Their compensation is based on the amount of time they work on your claim.Delays are to their advantage. Beware of delay tactics such as continual requestsfor documentation and information that you have already supplied.

Step 9. Be Aware of Quickie “Cash Out” Offers

To save money on adjustment and claim costs, some adjusters will try tosettle your claim quickly. Watch for these two common negotiating tricks:

• Assessing the damage based on cash-out prices, which will belower than the prices you will have to pay to restore or replacedamaged items. What the insurance company saves, you lose.

• Using former contractors to provide estimates. These folks are nolonger doing contracting and so won’t be doing the work. Theirpurpose is to provide the insurance company with third-partycredibility. Your negotiations should be based on written bids fromfirst-class contractors who will do the work immediately.

Cash-out offers often presuppose that an item will be restored rather thanreplaced. If the restoration fails to meet your reasonable expectations, you canrefuse to accept the work and ask that the item be replaced—UNLESS you cashout. With a cash-out, the insurance company has no further obligation to you.

Insurance Claims, Homeowner 223

Step 10. Negotiate Betterment Issues

Assume that your home’s interior paint job has an expected (depreciable)life of five years.

At the end of two years, there is a fire in your living room. The insurancecompany has agreed to repaint two smoke-damaged walls. The cost to paintthe two walls is $400.

Should the insurance company pay only 3/5ths of $400 because with anew paint job you are getting back the two years of paint life you enjoyedbefore the fire?

No.You weren’t bettered by getting back the two years of paint life you already

used: in three years, you will paint all four walls anyway.If all four walls were fire-damaged and repainted, you were bettered. It

would then be reasonable for the insurance company to deduct the deprecia-tion (two years of paint life you enjoyed before the fire).

Step 11. Don’t Accept the Insurance Company’s Contractor

Builders, contractors, and restorers solicit insurance company work by quot-ing low prices. To save money, insurance companies will hire these people. Butthese folks are often younger and less experienced than seasoned, high-qualitycontractors. This difference is reflected in their prices.

“Our insurance company only has one outfit that we work with” Must you usethe insurance company’s contractor if the bid is lower for the same work? Theinsurance company may make you pay the difference.

Remember, the insurance company’s obligation is to put you back where youwere before the damage. Perhaps this can be done less expensively with thecompany’s own contractors, but you aren’t obligated to accept work quality ormaterials that are not as good as what you lost.

Tip: Have your choice of contractor review the insurance companycontractor’s bid to make sure it specifies the same scope of work and thesame kind and quality of materials.

If you disagree and are unwilling to pay the difference between the twobids, then contact your adjuster’s supervisors and threaten to initiate arbitrationor litigation, or contact your State Insurance Commissioner or State Departmentof Insurance.

Step 12. The Money Can Go Two Ways

You and your insurance company have agreed on what needs to be done,the contractor to be hired, and how much is to be paid.

Some insurance companies will hire and pay the contractor. Others willwant to give you the money and have you hire the contractor.


If you cash out, you are on your own. The insurance company is out of thepicture no matter how the job turns out. But if the insurance company hiresthe contractor and the job isn’t to your liking, you can look to the insurancecompany for redress.

Negotiate to choose the contractor and to have the insurance companyhire and pay the contractor directly. Do not accept the job or release the insur-ance company until everything is at least as good as it was before the damage.

Step 13. Negotiate Extras and Remodeling

You may want to take advantage of the fact that your home is being re-paired to do some nonrestorative remodeling.

If you are going to remodel as well as restore, the best way to negotiatewith your insurance company is to have each contractor give you two separatebids: one bid for the insurance-related work, the other bid only for additionalwork needed to remodel your home while the insurance repairs are beingmade.

225

IRS

Negotiating With the IRS

The Internal Revenue Code is 3.4 million words (7,500 letter-size pages)long. The Federal Tax Regulations ramble on for thousands of pages more. Thereare 280 IRS forms. Even the IRS finds the tax laws almost incomprehensible.

Audit Negotiating Tips

How They Will BeEventually, you will get “the letter”—the IRS is requesting an “interview” for

the purpose of verifying the accuracy of your tax return.Nonbusiness and small business audits are conducted at the IRS offices

(office audits) by tax auditors. Tax auditors generally have no background in lawor accounting. They are IRS-trained to examine specific audit items, largelythrough the use of “Pro-Forma Audit Kits.” The kits deal with tax return lineitems such as casualty losses, rental income and expenses, and contributions.The routine and repetitive nature of their work makes them very proficient.

Revenue agents conduct the more complex field audits (on-site examina-tions). Partnership and corporate returns are almost always audited on-site atthe taxpayer’s business. Revenue agents are better trained and more experi-enced than tax auditors. Many have college accounting credits. Unlike tax audi-tors, their line of inquiry is neither channeled nor item-specific. Any income orexpense item is fair game for examination.How You Must Be

• Never allow any audit meeting to take place unless you are ad-vised in writing of the purpose of the audit.

• If your meeting will be anything other than routine, the IRS mustfirst inform you of that fact.


• If a special agent is present at your meeting, stop dead in yourtracks. Don’t say another word. Special agents are part of theIRS’s Criminal Investigation Division (CID). Now is the time tohire a professional.

You need not personally attend an audit meeting. Your pro-fessional representative may appear on your behalf. Consider:Should you go to it alone?

Because taxpayers are more prone to misstatements than theirrepresentatives, some agents encourage taxpayers to attend auditmeetings even if they have a professional representative in tow.

If you are easily flustered or are worried you’ll say the wrongthings, send a professional in your place.

• You can terminate an audit meeting by stating that it appears noth-ing is being accomplished and you have no desire to continue.Your file will be marked “Unagreed” and, if you request, it willthen be turned over to a group manager, who will try to resolvethe areas of disagreement.

Adopt a tax negotiator’s persona:• Be prompt.• Be seemingly cooperative. Have neat, accurate, and complete

records.• Be cordial, not rude. Be polite, not friendly. Being threatening or

antagonistic will only make matters worse.• Act as if you are in control.• Set out your position clearly and strongly. Be affirmative. The line

between tax avoidance (which is legal) and tax evasion (fraud) isboth thin and wavy. The pros themselves are often stymied indetermining the boundaries. Claiming an “aggressive” deductionis not fraud. Fraud is not making an error or forgetting some itemof income. Fraud is knowing what’s right but doing what’s wrong.It is intentional underpayment.

• Only answer the questions asked, but think about your answerbefore responding. Don’t get rattled.

• Unless you are answering a question, don’t speak. Don’t volun-teer information or documents. Give only information specifi-cally requested. Talk too much and you may raise tax liabilityissues that hadn’t been previously raised or contemplated.

• Leave your attitude at home. Keep politics to yourself. This is notthe time to share your views about how the tax system is inequi-table and oppressive.

IRS 227

• Auditors are trained to notice body language. Try to look relaxed.If you become concerned with how the meeting is progressing,you may call it to a halt at any time for the purpose of retaining aprofessional to represent you.

If you don’t reach an agreement, you will receive a Preliminary Notice givingyou 30 days to file with the Appeals Office. If you do not appeal, you willreceive a Notice of Deficiency and you will then have 90 days either to petitionthe Tax Court or to stop interest from accruing by paying the tax and claiming arefund. If you do neither, the tax will be assessed.

The means by which you will initiate an appeal will depend on the amountof your tax deficiency. The IRS will provide you with printed information as tohow you must proceed.

Appeals Office Negotiating Tips

Appeals officers are an elite group. They are mostly better educated, bettertrained, more experienced, and more secure in their jobs than office and fieldauditors.

Appeals conferences are informal meetings. You may represent yourself atan appeals conference or you may be represented by a professional.

Theoretically, the appeals officer, although an IRS employee, representsneither the IRS nor the taxpayer and adopts an objective, neutral approach asto what is reasonable under the circumstances.

What doesn’t the IRS want you to know: If you request, the IRS must nowdisclose relevant portions of your case file. Information you are entitled to seeincludes the IRS’s position relative to disputed items and any audit findings.

The Appeals Office’s willingness to settle conflicts largely depends on howit perceives the IRS’s chances of prevailing in the Tax Court. The IRS shiesaway from litigation if it appears the odds are not in its favor. Even with slam-dunk cases, an appeals officer may offer small concessions to save the IRS thetime and expenses associated with litigation.

If you lose your appeal, you will receive a Notice of Deficiency and will thenhave 90 days either to petition the Tax Court or to pay the tax and claim arefund.

“In Collection” Negotiating Tips

Collection officers are determined, intractable, and unemotional. They arecalled into play when tax is owed but not paid, or when no return is filed.Given their mindset that they are duty-bound to collect every cent owed, theycan be unrelenting.

Certificates and promotions are awarded to top producers. So intense isthe pressure to produce that collection officers are hair-trigger-quick to lien, levy,confiscate, or seize property. They can be capricious. They can be arbitrary. Theyare not above bluffing or harassing.


And if that’s not bad enough: Now for the first time, the IRS will also beusing the services of private collection companies to go after delinquent taxes.

Here’s what you need to know to protect yourself:• If a collection officer comes to your door unannounced, you do

not need to invite him or her in. By law, the officer must be invited.• Before there can be a valid lien or levy, the IRS must explain the

collection process, including how to appeal.If you take no action, the IRS may file a notice of a federal tax lien. A lien

attaches to and encumbers your property, making your property the securityfor the payment of the tax debt. A lien is not the taking of property but it ispublic notice that the IRS has a claim against you.

After 30 days’ notice, the IRS may serve a notice of levy. By levying, the IRScan actually take wages owed to you, bank accounts, a boat, car, or other property.

Certain things, however, cannot be levied by the IRS. Included in this exemptcategory are public assistance payments, a limited amount of furniture, personaleffects, tools of the trade, and a formula-determined portion of your wages.

If you are unable to effectively negotiate a settlement with a collection officer, youcan change negotiating levels by:

• Requesting a meeting with the collection officer’s group manageror requesting the manager’s name and how to contact him or her.

• Filing an appeal. An appeal officer will then consider the reason-ableness of your previous compromise proposal. Unless the IRShas a reason to believe your assets will be dissipated in the in-terim, it will not levy pending the appeal hearing. Through theAppeals Unit, issues may be resolved by correspondence, in per-son or by phone. You may represent yourself or be representedby an attorney, certified public accountant, or an “enrolled agent.”See IRS publications 5 and 556 and www.irs.gov for more details.

If the IRS’s collection action would result in a “significant hard-ship” (i.e., shutting down your place of business, or denying youthe ability to purchase necessities such as food, shelter, transpor-tation, or medical treatment), you may get immediate relief fromthe IRS Tax Payer Advocate Service that can quickly issue a bindingTaxpayer Assistance Order. This is the place to go if you’ve triedthe regular channels and feel you are stuck in a bureaucracy. Call(877) 777-4778 or go to www.irs.gov/advocate for details.

You can have your case heard without paying the contested tax up frontand then seeking a refund by taking your dispute to the U.S. Tax Court. SeeIRS publication 5 and www.ustaxcourt.gov for more details. Alert: If you go tocourt, your case, and potentially sensitive financial details become a matter ofpublic record.

www.irs.gov

www.irs.gov/advocate

www.ustaxcourt.gov

IRS 229

Criminal Investigation Alert

Special criminal investigation agents do not have the power to determinetax liability. Their calling is to search out hidden assets and unreported incomesources. In reality, they are federal police officers, even though they may comeacross as having a laid-back You can talk to me/trust me persona. Don’t considersecond-guessing Criminal Investigative Division (CID) officers, and never un-derestimate their ability. When contacted by the CID, consult a tax lawyer.

How to Negotiate With the IRS

Step 1. Make Time Your Ally

IRS employees, like everyone else, have deadlines. Postponing a meetingmay put pressure on them to finish. The price for finishing timely may be IRSconcessions.

Practice tip: A last-minute postponement will only antagonize the personwith whom you are meeting.

Scheduling your meeting at the end of the month is best. If the personcharged with your file has too many unclosed cases, he or she may be inclinedto settle more quickly in order to close your file.

Schedule your meeting just before a long weekend. The chances are prettygood that the person handling your file will show less interest in the audit thanin the upcoming holiday.

Schedule the meeting at 10 a.m. When it’s finally time to talk about adjust-ments, it will be near the noon lunch break. IRS personnel have been knownto make concessions to keep a meeting from interfering with their lunch hour.

Step 2. Keep Your Eye on the Big Picture

An auditor’s goal is to collect additional taxes, close your case, and moveon. Compromise on some smaller items. Trade allowances and disallowances.Be emotionally prepared to pony up some additional taxes. Don’t lose sight ofthe big picture—it’s the more important items that count in the end.

Step 3. Negotiate the Cancellation of Penalties

Negotiate the cancellation of penalties (not interest) by showing that suffi-cient cause exists for the failure that led to the penalty.

The IRS has historically found that sufficient cause for penalty cancellationexists when: the taxpayer has been ill (alcoholism, now considered an illness,can be grounds for setting aside a penalty); there is grave illness in the taxpayer’simmediate family; necessary documents were destroyed or not available; re-turns were sent to the wrong IRS address or sent with insufficient postage;there was reliance on bad professional advice; the taxpayer did not receiveforms requested from the IRS.


Step 4. Negotiate Payment Arrangements

If you acknowledge owing the tax but don’t have the money to pay, theIRS will negotiate a payment program.

Step 5. Negotiate a Partial Amnesty

Negotiate to reduce the amount of the tax owed. This is done by demon-strating doubt as to your liability for the amount owed or doubt as to yourability to fully pay the amount owed.

Be prepared to describe in detail why the IRS cannot collect more thanyou are offering. Your assets and present and future income will be consideredin evaluating your offer. This settlement offer of partial payment and/or a per-centage of future earnings in exchange for a release of all taxes, including inter-est and penalties, is called an Offer-in-Compromise.The Silver Bullet

Show your tax debt is excusable in bankruptcy. Do you have an income taxdebt for a tax year that was more than three years ago? Count from when yourtax return for that year could have been (not actually was) filed. If the result ofyour count is more than three years and if you actually filed your return morethan two years ago, then your tax debt and interest on that debt may, subject toother criteria, be discharged (excused) in bankruptcy. Special rules apply to thedischargeability of penalities.

However, not all taxes are dischargeable in bankruptcy. Bankruptcy and taxrules are very complex. Seek professional advice in determining whether thenegotiating leverage of threatening to file a bankruptcy and excusing tax debt isavailable to you.

Tax liens encumbering real or personal property survive bankruptcy eventhough the tax debt is discharged. In this situation, the IRS can do nothing morethan foreclose on its prebankruptcy lien.

For example: The IRS has a $60,000 tax lien encumbering your cabin. Youfile bankruptcy. The lien is not affected by your bankruptcy. The IRS, exercisingits lien rights, forecloses and receives $50,000. The IRS cannot collect the $10,000($60,000 minus $50,000) balance.

If you have more to gain than to lose in bankruptcy proceedings, the abilityto discharge your tax liability may give you significant negotiating power insettling with the IRS.

Free for All

To receive these free IRS publications, call (toll-free) (800) TAX-FORM:Publication 1, “Your Rights as a Taxpayer”Publication 5, “Appeal Rights and How to Protest if You Don’t Agree”Publication 594, “What You Should Know About the IRS Collection Process”Publication 910, “IRS Guide to Free Tax Services”

231

Jewelry

Negotiating Major Purchases:

The Fine Jewelry and Watch Game

Whoever said money doesn’t buy happiness just didn’t know where to shop.A gold Rolex Oyster Perpetual is a gold Rolex Oyster Perpetual at every

Rolex dealership.Gemstone jewelry, however, is different. The materials used (stones and

precious metals) can be compared and valued. But design and labor are blinditem price dynamics that can’t be readily quantified.

Jewelry profit margins ranging from 100 percent to 400 percent and upare not unusual. That incredibly liberal credit you see offered is possible be-cause the down payment can cover the cost of goods and throw off someprofit. Anything collected beyond the down payment is pure gravy.

Zales will. So will Tiffany. All jewelry stores—the world’s great names, na-tional chain jewelry stores, the small shop around the corner—will gladly nego-tiate when you know how.

Step 1. Learn What You Are Doing

If you can’t distinguish an emerald from a garnet, a ruby from a red spinel,or 10-karat gold from 18-karat gold, then take the time to learn what you aredoing. Then learn even more.

Gold and silver prices are based on their purity: 10-karat gold (41 percentpure) is less valuable than 14-karat gold (58 percent pure), which is less valuablethan 18-karat gold (75 percent pure). There is a difference when a label saysgold plate, gold filled, or solid gold.Tiny Baubles

Gemstones come in different grades and qualities. If you believe that thediamonds, sapphires, rubies, and emeralds being hawked on the televisionshopping networks are anywhere near top quality, you are already in trouble.


For every color you like, there are probably five or six gemstones in thatcolor. With gemstones, it’s color that counts. A green chrome tourmaline maylook a lot like a green zircon but because of availability may be worth twice asmuch. Flaws in colored stones will not impact their value as much as flaws willimpact the value of diamonds. Gemstones are often treated with oils and heat, toenhance their color. Appropriate inquiry should be made before purchasing.

Diamonds are universally graded by color, carat weight, clarity, and cut. Acolorless, flawless stone is the most valuable. Fancy shapes sell for 5 percent to10 percent less. Size is not the most important factor in diamonds. A half-carat,round-cut flawless stone with excellent color can cost twice as much as a three-carat diamond with poor color and noticeable imperfections.

Negotiating alert:• The American Gemological Institute’s universal grading system denotes

color in letters (near colorless D ranging downward to a faint yellow K).Clarity grades generally range from VVS1 (flawless) downward as VVS2’,VS1’ VS2’ S11’ and S12. Many jewelers sidestep the universal diamondgrading system by conjuring up their own self-serving grades, such as“deluxe quality” or “heirloom quality.” These fictional ratings may inactuality hover close to the bottom of the true universal grading scale.

• Beware of the A-word: “approximately.” A merchant’s appraisal can bemeaningless because diamonds are sometimes misleadingly bumpedinto a higher grade under the guise of having color and clarity that are“approximately graded________.”

Merchants’ appraisals are always at their retail (why would they give you anappraisal for less?). This is never indicative of worth. If you believe otherwise, thenask a reputable jeweler what the piece’s resale value would be if you have to orwant to sell soon. Medical alert: Be sitting down when you get the answer.

If you think of jewelry as an investment, you shouldn’t be buying jewelry.

Step 2. Try Not to Swoon

Oh, I just have to own this!Jewelry is an emotional purchase. It is even more emotional if you are

shopping for an engagement ring, Valentine’s Day gift, or special birthday oranniversary present. Advertising doesn’t tell us that diamonds are a great hedgeagainst inflation (they would be lying). It tells us diamonds are the gift of eternallove.

Let your enthusiasm show and you lessen your negotiating leverage. This isparticularly true for unique pieces that can’t be purchased readily elsewhere.

Step 3. Link

Merchants like to do more for people they like. A friendly, appreciativeattitude gores a long way.

Jewelry 233

Step 4. Make the Jeweler Invest in You

If you just stick your head in the door, set off the customer entering chime,and ask about discounts, the answer will be, “We are a fixed-price store.” (If itwas a “discount” shop, there would be a sign in the window.)

Get the jeweler to invest time in you. The more time spent comparingdesign, quality, and size variations, the more knowledgeable you will be. Themore time the merchant spends with you, the greater the propensity to makea deal. Remember: A jeweler’s investments, whether in inventory or time, aresupposed to pay off.

Step 5. It May Make Sense to Shop Around

If the piece you are considering is a budget buster, ask about the weight ofthe precious metal (expressed in grams or penny weights) and the size andgrade of the gemstones.

Shop around. Stones and precious metal are commodities that have readilyascertainable retail and wholesale prices. Everything else is design and labor.The value is in the eye of the beholder.

Step 6. Go for the Gold

With rapport established and time invested, try these price breakers:• My friend bought emerald earrings here a few months ago and received a

discount. How much are these earrings discounted?Possible response: What is the name of your friend?Your reply: Give the name of your uncle in Des Moines. It’s all anaccepted part of the face-saving, image-preserving negotiation process.

• If I buy the more expensive of these two rings, how much of a discount isavailable?

• This is a beautiful tennis bracelet. Its price is more than I budgeted. May Ileave my name and phone number and if it goes on sale, please call. (It maywell go on sale before you hit the front door.)Anticipated response: Open an account with us and we will finance thebalance.Your reply: I prefer not to be in debt by spending more than I have budgeted.Next anticipated response: Well, instead of the four-carat bracelet, whatabout the three-carat one—it’s beautiful on your wrist.Your reply: No, I am only interested in the four-carat bracelet.

• I will buy these diamond earrings if, in addition to the discount you offered,you will throw in that silver bangle bracelet for my daughter.

How much of a discount can you expect? It will depend on the merchant’scash needs, profit markup, inventory levels, and desire to make the sale.


Purchasing a Fine Watch

Omega, Rolex, Cartier, Baume & Mercier—the list goes on. Their highmanufacturer’s suggested retail price is deigned to add to the prestige of a watchthat keeps time with pretty much the same precision as a Timex. But then ifyou wanted a cheap watch you wouldn’t be at a nice jewelry store, you wouldbe at Target.

Watch manufacturers sell more than timepieces—they sell strap-on self-es-teem and identification. There is no goal attainment, self-satisfaction, or statusassociated with a cheap watch—even an accurate, cheap Japanese watch thatlooks like the expensive Swiss real thing.

As with all jewelry, watches are readily discounted if you follow the rules.Because they are not produced in limited editions, that watch you have

been admiring can be readily purchased elsewhere. Your negotiating powerflows from the dynamics of competition:

• You have been very helpful. I would like to buy this Omega from you,but I know that substantial discounts are available elsewhere. How muchcan you help me with the price?

• I would like to buy this watch from you, but I have a friend who is goingto St. Thomas (or Hong Kong, or some duty-free port) where thesame watch is much less. I know it’s hard to be competitive with out-of-the-country prices, but if you can make it more affordable for me Iwould like to buy it from you.

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Job Interviews

Finessing the Job Interview

A great resume only gets you in the door. Now you have to ace the interview.

Step 1. Power Generators

If at all possible, free yourself from the pressure and anxiety of a “do ordie” interview by having fall-back options in the form of other job offers oropportunities.

The greater the number and the more realistic your options, the more self-confident you will be. Self-confidence is a big part of what the interviewer isbuying.

Step 2. Loop In

Turn the interview into a dialogue. You should be talking about 60 percentof the time and interviewer about 40 percent. Ask questions that help theinterviewer see new ways of thinking about you that you can’t get at unless youask questions.

Open the interview dialogue with chit-chat about the traffic, the weather,the city team moving into the final round of the play-offs, or whatever. Chit-chat will give you a few minutes to be in control. By not feeling immediatelyput on the spot, you have the time to loop into a relaxed interview stride. Chit-chat doesn’t mean being chatty. Keep your comments brief. Let the interviewerrun with the conversational ball you have put into play.

Step 3. Don’t Drown in the Blur Pool

Look around the interviewer’s office. Is there a golf trophy, a Little Leaguecoach certificate, pictures of kids who are about the ages of your own, travelphotos of places you have visited, a diploma from your alma mater?


If you too are a golfer, parent, teacher, or alumnus of the same school, thenthese objects are tools that make it possible for you to personalize the interviewby creating, but not belaboring, a commonality of interest. Applicants who havelinked personally with the interviewer are remembered long after the othershave become part of the applicant blur pool.

Step 4. Go for the Fit

So what if it’s a drop-dead great-looking sweater in a style you have beenhoping to find? If it doesn’t fit, you aren’t buying.

You may have the educational and experiential background being sought,but if you’re not an all-around fit, you won’t get the nod. An all-around fitincludes fitting in with the company culture.

Practice tip: Before the interview, scope out the company’s culture. By ask-ing others who are familiar with the inner company, you will be better ableto act and dress in a way to make the fit happen.

Step 5. The Unasked Mega Questions

The interviewer probably won’t ask them. Nonetheless, the questions thatneed to be expressly or impliedly answered by you are: What can you do for thebottom line? Can you get the company back its money plus some? How did you do itfor your previous employer and how can you do it for us? (Will it be by bringing in newbusiness? Implementing new cost-saving measures? Introducing fresh insights and in-novative ideas?).

Step 6. Do the “Brieflys”

Briefly demonstrate:• An understanding of the industry—personal contacts (there is a

critical difference between being connected and being a namedropper), technical lingo, the market, industry practices, changingdemands, new pressures, and emerging competition.

• A knowledge of the company’s business—where it has been, whereit is headed, who is its management, what are its plans and goals.

Step 7. Be a One-Minute Hero

Interviewers care more about what you can get done than how hard youwork. Offer specific instances of what you have accomplished in a similar posi-tion, stressing results rather than activity. Limit these snapshots to no more thana minute each.

Step 8. Build Bridges of Opportunity

Ask questions about the open position’s responsibilities. Use the interviewer’sanswers as bridges of opportunity to show how your skills and abilities can meetthose responsibilities.

Job Interviews 237

What kind of things did you do on the last job? View this frequently askedquestion as an opportunity to shape an answer that shows you have both theexperience and the know-how to satisfy the position’s demands.

Practice tip: The interviewer doesn’t care about your life story, so leave outany information that doesn’t clearly and directly show you are the personthe company is seeking.

Step 9. The Great “I” Pit

If you are like most interviewees, your inclination will be to focus on whatyou want (I am looking for a position with real growth opportunity; I am interested ina position that will challenge me).

So what? Interviewers are being paid to fill their company’s needs, notyours. If you want the job, focus on what the company wants and how youcan satisfy those wants.

Practice tip: Until you are offered the position, don’t ask “I” questions—vacation and sick day benefits, expected hours, and perks.

Step 10. Making the Cut List

You will have a better chance of making the cut list if you:• NEVER EVER sell yourself as a bargain. Who wants to hire some-

one who has a “turned down all over town” sense of self?• NEVER EVER say you’re sorry about your shortcomings. No one

is perfect, so no one need apologize.Is there something in your history that could crimp your chances? If in all

likelihood that “something” will come up in the interview, then you should bethe one to raise it—not by way of apology but by way of explaining why itshouldn’t be a factor for concern. There is no need to otherwise volunteerinformation that is best kept to yourself.

If asked What are your weaknesses? don’t parade the horribles. Instead,finesse the question by answering in the broadest possible terms: Sometimes Iam too focused, or There are times when I am overly competitive.

• NEVER EVER memorize the answers to anticipated questions.Scripted answers come across as either wooden and rehearsedor slick and rehearsed.

Practice tip: Have friends or family toss you likely questions in a mock interview.

• NEVER EVER talk about your problems. As interested as the in-terviewer may appear, an interview is definitely not the place tounload.

• NEVER EVER be overly flattering or overly complimentary of thecompany or the interviewer. Your efforts will be transparent, andphoniness is a turn-off.


• NEVER EVER come across as having an Everyone wants to hire meattitude. You may be good, but you’re not so good that you canafford to be arrogant.

• NEVER EVER act anything other than your age. Even thoughyou feel a younger person has a better shot at the job, acting anddressing 20 years younger than you are will look foolish.

• NEVER EVER be critical of the employers or supervisors whereyou are now working or where you have worked in the past.Sour-grape comments alert the interviewer that she or he may bethe next person to be bad-mouthed by you.

• NEVER EVER mistake an interviewer’s friendliness for enthusi-asm. Interview pros know that by being friendly, candidates relaxand reveal more about themselves. Don’t relax too much, espe-cially towards the end of an interview. That’s when candidatesmost often let their guard down.

Step 11. Tips à la Carte

• Schedule yourself as the last interview rather than the first inter-view of the day. You will be better remembered than similarlyqualified applicants who, by the end of the interviewer’s day, willbe part of the blur pool.

• If told you will be called after the other applicants have beeninterviewed, position yourself to be a caller rather than a callee. Iwill be in and out for the next few days. May I call you back later in theday or in the morning? By being the caller, you have a second-shotopportunity to stimulate interest in your candidacy.

• Spend a few extra bucks on your clothes. Ninety percent of what aninterviewer sees is on your back. Making a fashion statement may beinconsistent with the company’s culture, but clean, pressed, prop-erly fitted clothing is a very big part of your first impression footprint.More important, you will feel better and more confident about yourself.

• Watch your body signals. You do not want to subconsciously ap-pear desperate, discouraged, or defensive.

• NEVER EVER mistake an interviewer’s friendliness for enthusi-asm. Interview pros know that by being friendly, candidates relaxand reveal more about themselves. Don’t relax too much, espe-cially towards the end of an interview. That’s when candidatesmost often let their guard down.

Step 12. With an Offer in Hand,

You Are Now Ready to Talk Salary

Don’t accept the job offer until all of the components of the salary andbenefit package are discussed. See “Salary, Beginning,” later in the Playbook.

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Lawyer, Hiring a

Hiring a Hired Gun

Lawyers bring objectivity to the table, raise unconsidered issues, contem-plate unforeseen problems, and test rationally what was decided emotionally.

Unless the task is small, negotiating a written retainer agreement that spellsout the terms of the attorney-client hiring is a must.

We lawyers like to think we are all things to all people.But the charming senior partner you initially met may be a mediocre law-

yer but a great “rainmaker”—the firm’s one-person sales force.Consider whether you need a lawyer to lead the way or to take your

direction.Some lawyers will be compatible with your personality. Others will not.The unrelenting steel-fisted lawyer you needed to hammer out an insur-

ance settlement last year may not have the soft touch to negotiate the sale ofyour business.

A creative lawyer with honed people skills may be better able to defuse,finesse, and coax to get the results you want.

Has the deal been verbally cast? Perhaps you need a technocrat who is askilled and thorough draftsperson.

Step 1. Seek Quality Legal Advice

Don’t hire the lawyer whom you met at the last church meeting, becausehe seems “pretty good.”

Bar Association referrals and “Lawyer Directory” services are of question-able help. No matter what their ads say, there is little or no substantive indepen-dent checking.


For more reliable recommendations, ask friends who had similar cases.Every major public library has Martindale-Hubbell (or see www.Martindale.com),

the recognized lawyer rating directory. Educational backgrounds and letter-graderates are all there for the viewing.

Step 2. Interview Several Lawyers

Most lawyers will initially meet on a “courtesy, nonchargeable” basis todetermine whether there is mutual interest in having the lawyer handle thecase.

If your matter is complex, interview several law firms. Ask them about theirapproach to your case. Wanting to sell themselves, lawyers are quick to mapout a strategy. You may be presented with new insights and previously uncon-sidered novel approaches.

Interview the people who would actually be doing your work. Ask aboutthe number and recency of matters they handled that were similar to yours.Ask about the outcomes of those matters and their clients’ costs for obtainingthose outcomes.

Step 3. Negotiate a Fair Fee Structure

The most expensive lawyer in town may be the cheapest. One insightfuland creative lawyer’s hour is another lawyer’s entire week.

When can you get the very best lawyer for the same price as an averagelawyer?

The answer: In traditional percentage-fee matters—personal injury cases,insurance bad-faith cases, and so on. In those situations, all lawyers pretty muchcharge the same percentage of your gross recovery. The best are the best be-cause they have the reputation and skill to obtain bigger settlements and awardsfor their clients.

One phone call. That is all it took for a lawyer acquaintance to settle hisclient’s personal injury claim with an insurance company whose insured readilyadmitted liability. My acquaintance’s percentage fee was $440,000!

You guessed wrong: the lucky lawyer is not a high-profile practitioner. Heisn’t even a personal injury specialist. He is a criminal lawyer with offices in atacky part of town.

In collection and personal injury claim matters where neither liability norcollectibility is in real doubt, negotiate hiring your lawyer on an hourly fee basisrather than a percentage (contingent) fee basis.

Forget how good it feels to be told by a judge that you are right. Judgmentsare not always collectible. Even if you win, you could lose.

Small suits have many of the same expenses as big suits: a lawyer’s time isby the hour; deposition reporters, processing services, filing fees, and othercosts are not predicated on how much you are seeking.

www.Martindale.com

Lawyer, Hiring a 241

If collectibility is in doubt, or the cost of litigation is subject to wide variablesbeyond your control, consider negotiating (a) a percentage fee, or (b) a lowhourly fee with a bonus on collection, or (c) a combination of a low hourly feeand a lower percentage fee.

Bonus benefit: Your proposal to pay something other than a full hourly feewill test the lawyer’s expectations of the outcome of your case.

If someone is trying to collect money from you, consider a reverse contin-gency fee, negotiating to pay your lawyer a percentage of the money the lawyersaves you.

Negotiate value-oriented hourly fees keyed to the relative difficulty or im-portance of the case components. For example, in litigation try to set a rate of$125 an hour for drafting pleadings, $150 an hour for the lawyer’s attendanceat depositions, and $325 an hour for the time the lawyer spends in trial. (Note:hourly fees vary dramatically from city to city.)Retainer Agreements

Retainer agreements provide for a “retainer fee” or initial payment.• Negotiate that the initial retainer payment is not a minimum fee

but a deposit for services to be rendered. By doing this you willreceive a partial refund if the actual fees turn out to be less thanthe retainer deposit.

• Negotiate which part of the retainer payment will be applicable tofees and which part to costs (filing fees, personal service fees,deposition reporters, and so on).

• Negotiate for the retainer to be applied as a credit against the firstpayment due the lawyer, rather than allowing the retainer to beheld as a “security for future payment deposit.”

• Negotiate and include in the retainer for contingency cases anagreement as to who will front the money required to advancethe case.

• Negotiate whether certain costs (for example, expert witnesses’fees, deposition reporters, trial costs, and so on) will not come outof your percentage share of the recovery but will be paid off-the-top, before any percentage allocation. This negotiation will de-pend on the nature of your case, the amount of anticipated costs,and the projected award.

• Negotiate and include in the retainer agreement when the per-centage earned by the lawyer will change: When a lawsuit is filed?When trial preparation is commenced? When trial commences?

A sliding percentage arrangement with a number of in-cremental percentage bumps may serve you better than the tra-ditional two-tiered agreement with bumps at the commencement


of the suit and again when the trial begins. Negotiate what consti-tutes “the beginning of a trial.”

• Negotiate and include in the retainer agreement whether the law-yer earning a contingency fee has an obligation to appeal if youlose the case.

Step 4. Avoid Overlawyering

Overlawyering comes in different shapes and sizes.You don’t need a $300-an-hour senior partner to do what a second- year

associate lawyer could do just as well for one-third as much.Large law firms are notorious for “double teaming”—sending two lawyers

on a task that can easily be performed by one.• Negotiate and include in the retainer agreement who will be do-

ing your work. Make sure skill and experience levels match youractual needs. You don’t need a top-tier trial lawyer to try a caseagainst a former tenant who did $3,000 of damage to your beachhouse.

Step 5. Keep Costs Under Control

When HK, a client, asked me to go to Chicago in April, he made arrange-ments for a first-class flight and a limousine to pick me up at the airport andwhisk me off to a suite at the Four Seasons.

When a corporate client sent me off to Chicago in May, the client’s expec-tations and budgeting were for economy seating and a taxi ride to a simpleroom at the Holiday Inn.

• Negotiate and include in the retainer agreement traditionallyunnegotiated cost items: per-diem allowances, transportation ex-pectations, and lodging expectations. Make sure you won’t bebilled separately for secretarial word processing time. Agree onfax and photocopying charges.

• Negotiate and include in the retainer agreement traditionallyunnegotiated time items: How will travel time be billed? Will yoube charged for time spent in the air or driving to a meeting acrosstown? This time is often billed at 50 percent or less of the regularhourly charge. Time spent preparing memos to your client file isoften not charged. Discuss discounting unproductive time spentwaiting in courtroom corridors.

Bonus benefit: Discussing money concerns will sensitize the lawyer to thefact that you will not tolerate cavalier spending or a meter that is alwaysrunning.

Lawyer, Hiring a 243

Step 6. Insist on Clear, Frequent Billing

• Negotiate to have each activity billed as a separate line item on thebilling statement.Not acceptable: “Conference with Smith, telephone call with Jones:25 minutes.”Acceptable: “Conference with Jones re refinancing: 15 minutes; Telephonecall with Smith re construction problems: 10 minutes.”

• Negotiate and include in the retainer agreement the frequency ofyour billing. The more frequent the billing, the better you will beable to monitor what the case is costing, what is being done toadvance your case, and who in the law firm is doing the work. Inno event should you be billed less often than once a month.

• Negotiate tenth-of-an-hour minimum fee increments and a billingformat that is very specific and descriptive. Specific and frequentbilling will keep you alert to overlawyering.

Don’t accept a billing item that refers to some mental activity such as thenondescript, but not uncommon, billing entry: “Attention to file.”

Step 7. Make Sure Your Lawyer Keeps in Touch

Do you have an immediate need or a situation that will require a great dealof lawyer interfacing? A lawyer who will be out of town or engaged in a lengthytrial won’t be able to deliver the service and attention you expect or require.

Negotiate an understanding as to time frames and accessibility. Will the law-yer be available to meet with you on weekends? On days when he or she can’tsee you at the office, will you be able to speak to the lawyer by telephone in theevenings?

Instruct your lawyer to send you copies of all correspondence and plead-ings. Informed clients are better clients for themselves and their lawyer. A back-logged lawyer will be more inclined to move your work to the top of the stackif he or she knows you are monitoring the effort.

Negotiating tip: Some clients wisely use their lawyers to squelch a deal thatthe client wants killed. The lawyer is hired to strictly follow the client’sscript and say “no.” By laying the blame on the lawyer, the client is able topreserve important relationships. After all, it’s the lawyer who squelchedthe deal.

Practice alert: In some states, the retainer agreement must indicate whetherthe lawyer has malpractice insurance. It’s a good idea to ask. The day youdiscover that your lawyer doesn’t have insurance is the day to say goodbye.

244

Litigation, Settling

Negotiating With a Litigation Opponent

Question: How many lawyer jokes are there?Answer: Only two. The rest are true stories.

Step 1. Decide: Expediency or Valor?

In litigation, winners never win enough. Losers always lose too much.Litigation is emotionally and physically consuming, brings out the worst in

everyone, eats up more time than you ever imagined, is costlier than you everdreamed, and can easily become the focal point of your being, robbing you ofother thoughts, opportunities, and a good night’s sleep.

And to make matters worse, it’s not enough to be right. Every day, lawyers,great and ordinary, win cases that were “absolute losers” and lose cases thatwere “dead-bang winners.”

Is it time to settle?It may put you ahead of the game.Ask yourself: What dynamics are there other than winning? Are relation-

ships at stake? Are prospects for future business being lost? Will your companydevelop a litigious reputation?

Step 2. Forget Early, Best-Shot Settlement Offers

Personal interests of attorneys vary. Lawyers being paid on an hourly basisoften try to crank out more work on larger cases. If you voice a Let’s give it ourbest shot early-on settlement offer, you help the lawyer on the other sidejustify the expenditure of additional billable hours and discourages settlementdiscussions.

Litigation, Settling 245

Best-shot high offers fuel the other person’s recovery expectation and reaf-firm his or her feelings of invulnerability and self-righteousness.

Step 3. Come Out Swinging

It’s human nature. Lawyers being paid on a percentage or contingency basislike to do as little work as is reasonably possible. A strong showing early on,which creates a load of work for your litigation adversary, encourages the con-tingent fee lawyer to settle sooner.

To the litigation adversary who is paying by the hour, it shows that youmean business and that the prosecution of the case will be long and costly. Yourearly settlement proposals will appear more attractive when compared to theexpense associated with long-term litigation.

Step 4. Keep Your Lawyer on a Short Leash

It may make sense to give your lawyer limited negotiating authority. Weakpositions that are inflexible become strengthened.

Step 5. Meet in Person

To defuse the hostility associated with litigation, arrange a personal meetinginstead of a phone call. People investing the time and effort to attend a meetingare less likely to quickly say no and more likely to consider creative problem-solving approaches.

Step 6. Take Another Look—This Time at Your Lawyer

This is what your lawyer won’t tell you.The fact that your case isn’t being settled may be the result of your lawyer’s

personal style. Your best negotiating play may be to change lawyers.Style problems are people problems. Most litigation lawyers have competi-

tive personalities. Competitive lawyers tend to negotiate competitively withboth their competitive and cooperative counterparts. The most effective nego-tiators are masters of soft-touch/hard-bargain negotiating: competitive prob-lem-solvers who seek competitive results in a cooperative manner.

Step 7. The “Lloyd’s of London” Tactic

What amount does your litigation adversary reasonably believe would beawarded by a court? What does the other side reasonably believe are the chancesof winning? Multiply the answers by each other ($100,000 probable awardtimes a 60 percent chance of winning = $60,000). If the resulting number is toyour liking, explain how it was derived and use it as a justified basis for settle-ment negotiations.


Step 8. Get an Expert of Your Own

Don’t argue with your litigation adversary’s expert appraisers, geologists,inspectors, physicians, psychologists, or whatever. It seldom works, so whyalienate everybody? Instead, get an expert of your own.

Step 9. Change Games

Consider resolving disputed issues in mediation. If the litigation case hasprogressed far enough for each side to accurately assess the facts, the law, andthe risks, the timing may be ideal to consider mediation. Wait too long and bothsides will have spent so much time and effort preparing for trial that furtherpreparation will be unnecessary and the prospect of substantial legal fees beingincurred will no longer be a threat or incentive to settle.High-Low Mediation

Set aside all the agreed-on issues. If the remaining issues are financial issues,agree on a ceiling number (what the plaintiff would accept in settlement) and afloor number (what the defendant would pay in settlement).

Mediate the remaining financial issues with this understanding: the media-tor can make a binding award that can be neither higher than the ceiling norlower than the floor.Last-Chance Mediation

A neutral party acting as an arbitrator gathers facts, hears arguments, andthen prepares a written award, which he or she places in a sealed envelope.The neutral party then, acting as a mediator, encourages a negotiated settle-ment. If a settlement is reached, it is conclusive. If no settlement is reached, theaward in the envelope is determinative.

The parties, knowing an award has been rendered, although not disclosed,are motivated to negotiate their own settlement.

Step 10. Look for Trade-Offs

After a preliminary settlement has been negotiated, but before it is reducedto writing, explore tax and other trade-offs that may be to the benefit of bothparties.

247

Loan

Negotiating a Borrowing Transaction

There are 250 varieties of shark, not counting loan and pool.

Step 1. Put on Your Borrower’s Face

No one will lend you money just because you need it. Tales of desperationand bad luck aren’t what it’s all about. Lenders are businesspeople who makebusiness decisions. Philanthropy is not part of their decision-making process.

Be positive about what the future will hold. Lenders like to think they havea good shot at being repaid.

Look and act the part of a worthy borrower. Dress to reveal a responsibleand capable you.

Be well organized. Lenders need to know you have a grasp of your ownfinances—earnings, assets, and so on. Organized people are more likely to maketimely payments.

When you want a loan, have a reason that will make you an even strongerand more able borrowing candidate. Needing the money to go to Maui is a niceidea but not as compelling as fixing up a house, which enhances the value of anasset, or starting a business, or acquiring new skills that increase your earningspotential.

Step 2. Line of Credit or Lump-Sum Loan?

Are you borrowing money and using the equity in your home as collat-eral? Distinguish between a home equity loan and a home equity line of credit,and then negotiate the type of loan that best satisfies your needs.

A home equity loan is a lump-sum loan made at either a variable or fixed rateof interest. The loan is repaid in equal installments (amortized) over a number


of years—usually 15 or more. If interest rates are low and you need the moneyfor a one-time transaction such as remodeling the kitchen, this may be the type ofloan to negotiate.

A home equity line of credit is a variable interest rate loan. The lender agreesto lend you up to a certain amount of money. You borrow from time-to-timeas needed, repay as you are able, and pay interest only on the amount actuallyborrowed. If your needs are ongoing, such as periodic college tuition, this typeof loan may be the one to negotiate.

Step 3. Know Where to Go Loan Shopping

Compare all terms offered by a number of lenders, not just those with thebiggest ads.

You will always be better off starting your loan shopping at a major bank,major savings and loan, or other large lender. The cost of obtaining your loanwill be less, and the borrowing terms will be more favorable than with otherlenders. Referred to as credit lenders, their primary lending criterion will be yourcredit—the ability to repay.

The second most desirable lenders are smaller institutional lenders who aregenerally willing to make riskier loans. Referred to as asset-based lenders, theirprimary lending criterion will be whether you can secure the loan with collat-eral that can generate the cash needed to repay the loan (real estate, accountsreceivable, inventory, and so on).

As a last choice, there are direct lenders—noninstitutional companies orindividuals who make loans. Referred to as equity lenders, they are less con-cerned about your creditworthiness than they are about real estate equity col-lateral. Some of these lenders may actually hope you will default, enablingthem to foreclose on your home. The most costly loans in terms of both inter-est rates and loan fees are those made by this third tier of lenders.Loan Shopping Tips and Traps

• Don’t pay any money in advance for a loan except for the cost ofa credit report.

• Don’t pay for an appraisal until you have a loan commitmentpredicated on the value of the property to be appraised.

• Be on the alert for hidden loan costs. Ask about all of the lender’sloan transaction fees and charges.

• Make sure your financial statement is complete and accurate. Ifyou are forced to file bankruptcy and the financial statement yousupplied a lender is materially false, there is a good possibility youwill not be able to discharge or excuse your loan indebtedness.

The Lone ArrangerIf you’re having trouble getting a loan, consider hiring a loan broker who,

for a fee, will assist in matching you up with the right lender.

Loan 249

Step 4. Negotiate Interest Rates

Negotiate the interest rate aggressively: Over 10 years, a difference of just0.125 percent (1/8 of 1%), on a $500,000 loan is more than $6,000 in extrainterest payments!Fixed Rate Loans

Are interest rates presently low?If so, you will want to lock in those rates by negotiating a fixed rate of

interest (the rate won’t vary during the term of your loan).Negotiate an interest rate that is simple rather than compounded. Compounded

interest will always cost you more because the lender is accruing interest oninterest already earned.Variable Rate Loans

Are interest rates presently high?If you don’t expect rates to go higher and stay higher, consider a variable

rate loan, which fluctuates as interest rates themselves fluctuate.• Get the details on “special” introductory teaser interest rates. Those

attractive rates you see advertised often change dramatically afterthe first few months of a long-term loan. Look at the variableinterest rates with a long-term perspective. Ask: When, how, andto what degree can the teaser rate change?

• Negotiate an interest rate adjustment period that is as infrequent aspossible (semiannual or annual rather than quarterly), if it appearsthat interest rates will go up over the longer term.

• Negotiate a cap limiting how much the interest rate can be in-creased in any one adjustment period (i.e., a quarterly maximumhike of 1/4 percent rather than 1/2 percent).

• Negotiate a ceiling limiting how high the interest rate can go duringthe term of the loan.

When and how much your loan will fluctuate will depend on externaldeterminants such as the Federal Reserve discount rate or the prime rate. Com-pare by asking lenders about the volatility of their variable determinants.

Practice alerts:

• Do not accept a provision whereby you are borrowing both principaland interest but receiving only the principal.

For example, assume a 12 percent interest $100,000 loan. Thefirst year’s interest would be $12,000. Some lenders require that youborrow and pay interest on $112,000. The lender would, however,only hand you $100,000. The unfunded $12,000 is deemed the firstyear’s interest prepaid.

• Look beyond what your monthly payments will be. A loan may havea negative amortization to keep payments low. But watch out for this


trap! The lender wants you to pay a high rate of interest. You want lowmonthly payments that are not possible with a high rate of interest.Let’s say the “high rate” interest payment each month is $500. To getyou to accept that rate, the lender says only pay $300 of the $500interest that accrues each month. The $200 monthly interest shortfallis added to your principal balance and now, being a part of principal,unpaid interest itself accrues interest.

• A lender or broker may entice you with a low rate and later hit youwith an uncompetitive rate, explaining, “the market has changed.” Avoidthe trap by applying for loans at several places and having them makeoffers within a few hours of each other. There are websites that helpsconsumers get multiple offers (for example, www.LendingTree.com). Alert:The best offer made doesn’t mean you’re not overpaying. You need todo your own research to make sure you’re getting a good deal.

Step 5. Negotiate How Your Loan Will Be Collateralized

• Negotiate the required amount and type of collateral, but post nomore collateral than is reasonably needed to secure the loan.Don’t be intimidated by the standard lender response: If youare going to pay on time, what difference does it make? No oneknows what the future holds, and you may needunencumbered assets later.

• Negotiate the ability to substitute the collateral with othercollateral of like or greater value. For example, if your loancollateral is General Motors stock, you want the future ability togive your lender substitute collateral so you can sell the GMstock without paying off the loan.

• Negotiate that your collateral is incrementally returned to you asyour loan is repaid. For example, if stock is the collateral,negotiate to have $750 of your stock returned to you for each$1,000 of loan repayment. In real estate collateralized loans,acreage release clauses are not uncommon.

Collateral practice alert: Be on the lookout for these common lender provisions:

• A requirement that you replace or replenish collateral if there is a dimi-nution or lessening of its value.

• A prohibition against removing the collateral from where you will behousing, using, or storing it.

• A prohibition of further borrowing against the same collateral. (Lend-ers believe that if borrowers have little or no equity in the collateral, theywill be less likely to be concerned about its dissipation or condition.)

www.LendingTree.com

Loan 251

Step 6. Negotiate Loan Fees

The fee you will pay for your loan is commonly expressed in points.A point is 1 percent of the principal amount borrowed. If a $10,000 loan

costs 10 points, then your cost for the privilege of borrowing is $1,000. If it is aone-year, 10 percent loan, the loan is, in effect, costing you 20 percent the firstyear.

Points are negotiable. The less risky the loan, the fewer the points you willhave to pay to acquire the loan.

Step 7. Negotiate Penalties and Defaults

Be on the lookout for and negotiate these common lender penalty anddefault provisions:

• The length of grace periods. Do installment payments have tobe received by the lender right on the dot, or is there someleeway for postal or other unavoidable delays?

• The amount of late payment fees. Late payments are penalizedby imposition of an extraordinary fee or surcharge. Negotiatethe amount of late fees and when they will be charged.

• The default interest rate. Negotiate whether an interest rateincrease will apply to the entire loan balance for the period thatloan arrearages are not paid.

• Negotiate under what default conditions the note balance canbe accelerated and become suddenly all due and payable.

Practice alert: Defaults are not always monetary. For example, failure toprovide required periodic financial statements or proof of insurance re-newal on loan collateral may be an event of default.

• Negotiate whether interest arrearages will themselves bearinterest and, if so, at what rate.

Step 8. Negotiate the Loan’s Renewal Criteria

Negotiate under what circumstances the loan maturity can be extended.Circumstances may include timely payment, partial principal reduction, an ex-tension fee, or a reappraisal of collateral.

Step 9. Negotiate Away Early Payment Penalties

Early payment penalties are designed to discourage early loan repayment.Lenders who lend money when interest rates are high will want to receiveinterest from you for as long as possible. Negotiate that the loan can be paid offat any time without a prepayment penalty.


Step 10. Negotiate the Loan’s Assumability

Is the loan to be secured by real estate or other property you may sell inthe future? If so, negotiate that the loan can be assumed by your buyer withoutthe payment of an expensive loan fee. This locked-in ability of a buyer to takeover your existing financing will make it easier for you to sell your house later.

Step 11. Negotiate Guaranty Obligations

Negotiate that there will be no guaranties. Guarantors are usually family orfriends—the last people on earth you want stuck with your debt.

But if a guaranty is a must:• Negotiate a limit on the amount guarantied. For example, if the

loan is $100,000, negotiate that the guaranty is only for$50,000 of the loan amount.

• Negotiate that the guaranty is limited to repayment of first ratherthan last moneys.

In the above example, negotiate that only the first $50,000 of loan repay-ment is guarantied. If you have paid $40,000 of the loan, your guarantor’sliability would be limited to $10,000 because the guaranty is that your lenderwill receive a minimum of $50,000 in loan repayment.

Practice alert: Distinguish a guaranty for timely payment from a guaranty ofeventual collection (a guaranty that is invoked only when all other avenuesand sources of repayment have been exhausted).

Step 12. Negotiate the Length of Your Lock-In

A lock-in is a lender’s binding commitment that you will be lent money onspecified terms: points, interest rate, repayment. Lock-in commitments mostoften are in letter form. You pay for the privilege of having the interest ratelocked-in. How much of a fee you will pay for the “lock” will vary with theamount and type of loan and the length of the lock.

Generally, lock-ins are for 15 to 60 days. What if a home purchase loan islocked in, but now the closing date to buy the house is unavoidably extended?If interest rates jump, the lender will probably not extend its commitment toloan at the old (lower) lock-in rate. Never knowing when interest rates willincrease, it makes sense to negotiate as long a lock as possible.

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Office Lease

Negotiating Your Office Lease

The print is small. The sentences go on forever and some paragraphs fill anentire page. Reading them is an exercise in patience. Understanding them canbe difficult.

So why go to all the effort? After all, the broker and landlord have alreadysaid it’s all “very standard.”

No wonder small businesses get into so much trouble with their officelease.

Monetary Issues

Step 1. Negotiate Base Rent

Base rent is a function of how many square feet of space you are leasingand how much you will pay per square foot.

To compare per-foot asking rates, understand how the landlord calculatesthe number of feet being leased.

There are two common ways for landlords to determine square footage:• Usable footage: You pay only for the number of feet within your

office.• Rentable footage: You pay for the number of feet within your

office plus a portion of the common-areas space (halls, corridors,elevator lobbies, restrooms, and so on) on your floor. If youroffice occupies 10 percent of a floor’s usable footage, you wouldalso pay rent on 10 percent of the floor’s common areas.


Before negotiating the per-square-foot rate, negotiate what will be excluded from thefootage calculation. For example, in some real estate markets, you can excludeyour office’s exterior balconies, terraces, and support columns.

Step 2. Negotiate Rent Concessions

Landlords are often willing to grant concessions by arranging for free rent.For example, the first month of each year of the lease term is rent-free. Bygiving free rent rather than lowering the square footage rate, landlords are ableto maintain an actual rental rate continuity among tenants.

By averaging concession rent (“free rent”) with your actual rental rate, youarrive at a blended lease rate, which is referred to as the effective rental rate. Forexample, if you have a 36-month lease with an actual rental rate of $1,000 permonth and you get two months free, your effective monthly rent would be$34,000 divided by 36 or $944.44 per month.

When comparing competitive leasing opportunities, effective rental ratesrather than actual rental rates are the comparison factor.

Negotiate concession rent by convincing the landlord:• You are considering other buildings.• You will be a stable, creditworthy tenant.• You will be improving the leased space at your expense.• Your business is of a type that would attract other tenants or

enhance the building’s image.

Step 3. Negotiate When and How Rent Is Increased

Will your lease be longer than a few years? If so, the landlord will want theability to raise your rent during your lease term.

• Negotiate when, if ever, the rent increase would start (for ex-ample, the increase would start in the third year of the lease).

• Negotiate whether the increase will be a fixed amount (“bumps”)or will be tied to an inflationary index (usually the ConsumerPrice Index).

• Negotiate a cap or ceiling on the size of the percentage of increase,if an inflationary index will be determinative. For example: Theincrease shall be no more than 5 percent in any one year.

Step 4. Negotiate Pass-Through Exclusions

Most office leases will obligate you to reimburse the landlord for yourproportionate part of the landlord’s building costs and expenses (“pass-throughs”),such as insurance, management, personnel, repairs, and property taxes.

Negotiate pass-through exclusions. You should NOT have to pay pass-throughbuilding costs associated with:

Office Lease 255

• Retail or garage operations in the building.• Upgrading the building to comply with handicap, fire, or safety

codes that were in effect prior to the date of the lease.• Real property tax penalties incurred because of the landlord’s late

payment.• Increases in real property taxes resulting from a change in owner-

ship of the building.• Leasing commissions.• Costs incurred in disputes with tenants.• Costs for capital improvements or replacements, unless they will

reduce building operating costs so there will be a net savings totenants.

• Landlord’s general overhead and administrative expenses.• Compensation paid to parking attendants or clerks in commercial

operations.• Advertising and promotional expenditures.• Costs arising from the presence of hazardous materials.• Repair of latent defects in the building core or shell, or landlord-

installed improvements.• Landlord’s own management fees in excess of 3 to 5 percent of

the gross rental revenues.Negotiate a ceiling or maximum (“cap”) on the annual amount that can be

passed through to you as an added cost. For example: Pass-through costs cannotbe increased more than 5 percent per year.

Negotiate the right to audit the landlord’s records relating to pass-throughitems.

Step 5. Negotiate Away Charges for Extras

Are building services such as after-hours or holiday air conditioning, heat,and elevators provided only on an “extra charge” basis? If so, negotiate:

• How many free “extra charge hours” you will be allowed eachmonth.

• The price of extra charge hours (e.g., landlord’s actual cost plus10 percent).

Step 6. Negotiate Deposit Issues

What kind of deposit is being requested? A deposit for rent? A deposit forsecurity that the premises will be returned in good condition?

• Negotiate that you are creditworthy enough that no deposit iseven necessary, or suggest that a letter of credit can be used inlieu of a cash deposit. With a bank letter of credit, the landlord is


protected and your cash will not be tied up. (Note: Brokers dis-courage letters of credit; their commissions are often paid fromthe deposit.)

• Negotiate whether your cash deposit will bear interest.• Negotiate that your rent deposit can, in whole or part, be applied

to rent as you prove yourself creditworthy during the term ofthe lease. For example, 20 percent of the deposit will be appliedto rent in each of the last four years of a five-year lease.

Time Issues

Step 1. Negotiate Renewal Options

Moving into a new office is not only a pain, it’s expensive. Now is the timeto negotiate an option to renew your lease.

The key issue is the rent for the renewal term. Renewal-term rent can bestated either (a) as a fixed dollar amount or (b) at the downstream market ratein effect when your option is exercised.

If you foresee a strong downstream leasing market with rising rents, youwill want to negotiate a low fixed dollar rate now.

If, however, you think the leasing market will soften with decreasing rents,you will want to negotiate a downstream rate based on the market rate at thetime of renewal. In that case, NOW is the time to:

• Negotiate how the downstream market rate will be determined.Will it be based on the rents then in effect in your building, orin similar buildings in your geographic area?

• Negotiate a discount from the downstream market rate. Thisdiscount should take into account:a. Free or concession rent then being given by the landlord to

new tenants.b. The landlord’s savings by not having to pay a broker’s

commission.c. The cost of tenant improvements or improvement

allowances being given by the landlord to new tenants atthe time of renewal.

Step 2. Negotiate a Right of Early Termination

New businesses often don’t always work out as well as hoped.Ask for the right to terminate the lease early without liability by giving ad-

vance notice (six months’ advance notice) or paying a penalty (a sum equal to twomonths’ rent).

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If the landlord won’t negotiate a right of early termination, negotiate a shorterlease with successive short option periods (instead of a five-year lease, a one-year lease with four one-year option periods).

Expansion/Contraction Issues

Step 1. Negotiate Expansion Space

If you are confident that your business will expand in the foreseeable fu-ture, negotiate the right to acquire adjoining space.

There are three ways this acquisition can be negotiated:a. A right of first refusal. The landlord must offer you adjoining space

on the same terms as a prospective tenant has offered to pay.b. A right of first negotiation. The landlord must negotiate with you in

good faith before putting the adjoining leasing space on the mar-ket. A right of first negotiation, however, does not ensure that adeal will be made.

c. An option. The landlord must make adjoining space available toyou when the space becomes vacated. The option rental ratesissues are the same as in Step 1 of Time Issues, discussed earlier inthis section.

If the landlord is willing to grant you any of the three rights listed above,then now is the time to:

• Negotiate that the adjoining space lease will expire concurrentlywith your original lease.

• Negotiate that the cost of breaking through walls to the adjoiningspace will be at the landlord’s expense.

• Negotiate an allowance to modify or refurbish the adjoining space.

Step 2. Negotiate the Right to Change Offices

Do you have your eye on space presently occupied by another tenant inthe building? Negotiate the right to move into those offices when they becomeavailable.

Tenant Improvements

Negotiate office enhancements: new carpeting, painting, wallpaper, cabi-nets, a sink, more interior walls, and so on, or a cash allowance to make en-hancements of your own.

Parking Issues

Negotiate:• The number, location, and cost of spaces.• The landlord’s right to raise parking prices.


• Options to increase and to reduce the number of spaces.• The right to move to other spaces as they become available.• The cost of client/customer parking (discounted validations, free valida-

tion stickers).

Sublease Issues

Negotiate the right to sublease or assign your lease and to be released fromyour obligation to the landlord if the new tenant is financially worthy.

If the printed lease provides otherwise, negotiate the right to keep foryourself any sublease or assignment profits.

The lease, when delivered, will in all likelihood be a form. It may be thelandlord’s own “standard form” or that of an association. There is nothing sa-cred about a form. The lease was chosen by the landlord because it protectslandlords. Read and understand each and every provision. Make sure that thelease serves and protects you.

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Prenuptial Agreement

Negotiating a Prenuptial Agreement

Marriages are made in heaven. But then so are thunder and lightning.

Step 1. Be Prepared for an Emotional Response

“You said the only important thing is that we’re together.”Brace yourself. This may be your toughest negotiation ever. It’s not the

terms and conditions you will be sweating. It’s your intended’s reaction whenyou pop the other question, “Will you sign a prenuptial agreement?”

Call it what you want. A prenuptial agreement is a marriage contract.Negotiating a prenuptial agreement can be an enriching experience that

enhances a couple’s knowledge and appreciation of each other’s desires, fears,and expectations. Hidden agendas are brought to light. Before they say I do,couples are forced to discuss how money will be handled during the marriage.

Prenuptial agreements can also be the stage for a frustrating and perhapsdisappointing struggle for domination, power, and control.

Considering the high rate of divorce, prenuptial agreements make sensebecause they:

• Stipulate what is community or marital property and what is separate.• Define the estate’s rights at the time of death.• Provide for agreed-on (rather than judicially determined) spousal

support or alimony in the event of divorce.• Help prevent business ownership disputes, which can be disrup-

tive to a business.• Deal with financial ties and obligations to the spouses’ respective

families.


Step 2. Don’t Negotiate the Agreement

as Guests Are Arriving

“Honey, please sign here....”Prenuptial agreements are not a guarantee against a knock-down, drag-out

divorce. Like any contract, they are often contested.Prenuptial agreements negotiated and signed under pressure have a greater

possibility of being declared null and void. Agreements signed shortly beforethe wedding are arguably signed under pressure: the only choices are to sufferthe humiliation of breaking off the engagement or to accept an unsatisfactoryagreement.

Step 3. Negotiate a Fair and Reasonable Agreement

“Don’t you trust me? I wouldn’t do anything to hurt you, or anything that isunfair.”

The enforceability of an agreement with onerous terms that leave a spousesadly undersupported may be contested as being neither realistic nor fair.

Step 4. Maker Sure Each Spouse Has His or Her Own Lawyer

“Don’t worry about having your lawyer look this over. Everything will be redoneand taken care of later in a will.”

A will is a unilateral document that can be secretly changed at any time byits maker acting alone. A prenuptial agreement is a bilateral document and canbe modified only by mutual consent.

The prenuptial agreement you are negotiating will best survive challenge ifeach intended spouse has separately retained lawyer review the agreement.Each lawyer should acknowledge in writing that the fiance-client thoroughlyread and understood the agreement and that its terms and conditions wereagreed to free of duress or pressure.

Step 5. Negotiate with Candor

“So what if I didn’t tell you everything? I thought you loved me—not my bankaccount.”

Holding something back? Another basis for contesting a prenuptial agree-ment is that assets were not fully disclosed and that the agreement wouldnever have been signed had all the facts been revealed up front.

Step 6. Negotiate What Will Happen During

Marriage and in the Event of Divorce

“In my mind I believed that....”Prenuptial agreements are particularly important in second marriages where

the new spouse comes to the marriage with children, accumulated assets, anda disparity in respective net worth.

Prenuptial Agreement 261

Matrimonial laws vary from state to state. Some states recognize commu-nity property; others embrace a concept of “equitable distribution” upon di-vorce. This step and Step 7 are designed to serve only as examples of negotiatingpossibilities. It is imperative that the actual prenuptial agreement be prepared bya legal professional who is familiar with applicable state law.

• In the event of divorce, the nonaffluent spouse will receive in lieuof alimony a settlement of X dollars for each month of marriage.

• During marriage, the affluent spouse shall pay all or a greater partof living expenses.

• During marriage, payments will be made by the affluent spouseto the nonaffluent spouse. (This possibility is useful if thenonaffluent spouse is assuming a caretaker role.)

• Assume a spouse has property with a value of X dollars at thetime of marriage. At the time of divorce, it has a value of X + Y.The spouse who owns that property would, in a divorce proceed-ing, receive credit for X, and Y would be divided equally or insome agreed proportion, depending on the length of the marriage.

• During marriage, a spouse owning separate property will pay taxes,upkeep, and maintenance on that separate property.

• During marriage, the affluent spouse’s income is separate, but anegotiated percentage of that income over a certain base level(i.e., the income during the year prior to marriage) will be giftedto the nonaffluent spouse.

• Professional practice and business are separate, but the earningsduring marriage will be deemed community.

• Earnings, rents, profits, and income of separate property shall them-selves be deemed separate property.

• During marriage, all debts other than for living expenses shall bethe separate obligation of the spouse incurring the debt.

• At the time of marriage, the nonaffluent spouse shall release allrights acquired through a cohabitation relationship with this part-ner prior to marriage.

• And down to the fine strokes, some real examples:“If marriage ends in divorce, neither party can attend childrens’

little league games with a date.”“After divorce, wife has custody of the pets and husband must

pay pet support.”

Step 7. Negotiate What Will Happen in the Event of Death

“I understand ‘til death do us part...but then what?”Examples of negotiating possibilites include the following:


• Upon death, the nonaffluent spouse will receive a stipulatedamount per month for the remainder of his or her life.

• Upon death, the nonaffluent spouse will continue to live in theaffluent spouse’s furnished house for the remainder of his or her life(or until remarriage, or for six months for each year of marriage).

• The nonaffluent spouse would be both the owner and benefi-ciary of a life insurance policy on the life of the affluent spouse.Premiums would be paid by the affluent spouse. Each year ofmarriage, the amount of the policy would increase to an agreedmaximum.

• The affluent spouse will provide for “allowance” payments to bemade to the survivor spouse upon death. The amount and durationof those payments will be keyed to the length of the marriage.

• If the affluent spouse dies first, designated assets received by thesurviving spouse will, upon his or her death, revert back to thefamily of the affluent spouse (for example, family heirlooms, fur-niture, art, china).

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Real Estate—Listing Broker

Negotiating a Broker Listing Agreement

“Your house is wonderful. It is certainly salable for close to the price you have in mind.”—Broker soliciting a listing

“Your house needs a lot of work. The kitchen is 20 years behind the times. Your priceexpectations just aren’t realistic.”

—Broker now encouraging the acceptance of a low offer

Step 1. Motivate the Broker

They need cash, or there is a job waiting in another town, or whatever.Sellers confide in their brokers, disclosing why they need to sell.

“Highly motivated” is how brokers describe their desperate sellers in ads orby word-of-mouth. In effect, the brokers are announcing to the world that thesellers are running low on negotiating power.

Turn things around. Motivate your broker.• Negotiate a shorter listing (for example, 90 days instead of six

months). Let the broker know that if you feel that the broker isdoing a good job, you will extend the listing.

• Negotiate for the broker to supply you with a monthly list ofprospects who were shown the house by your broker, and anupdate as to whether any of those prospects are presentlyinterested.

• Negotiate what the broker will do at the broker’s expense to getyour house sold. Ads? (How often? How big? Where?) Flyersor brochures? Open houses? (When?)


Step 2. Keep the Pressure On

How do you avoid having the broker sandbag you with unqualified buyers?The chance that your broker will screen potential buyers and will bring

qualified, able buyers to your premises is enhanced if you negotiate to eliminatefrom the brokerage listing agreement any provision that:

• Allows the broker to share in the buyer’s forfeited deposit (theusual forfeiture clause calls for a 50/50 split).

• Extends the listing period by the amount of time your housewas off the market in contemplation of a sale that was aborted.

Step 3. Avoid the Commission Paradox

Brokerage commissions are negotiable.But whatever the agreed-on percentage commission, why pay a commis-

sion on the part of the purchase price that the broker receives?The paradox: If the sale price is $400,000 and the commission is 5 percent,

why pay commission on the $20,000 that goes to the broker? You would thenbe paying a commission on a commission.

Avoid the paradox! Negotiate a commission based on the gross sales price($400,000) divided by 1.05 percent (in a 6 percent deal, divide by 1.06 per-cent, and so on). The resulting figure ($380,952) would then be multiplied bythe commission rate (5 percent). In this example, the commission would be$19,048 rather than $20,000.

Step 4. Go Multiple

Negotiate that your broker will place the property with a multiple listingservice immediately. Brokers sometimes will keep your listing a secret— what theindustry refers to as a “pocket listing.” The secret is to your detriment becauseyou are denied maximum exposure to the market. The secret is to the broker’sbenefit because a broker who is able to sell a house solo avoids the obligation toshare the commission with another brokerage firm or another salesperson inthe broker’s own office.

265

Reservations and Tickets

Negotiating Tickets, Reservations,

and What Can’t Be Gotten

The plans for my parents’ July golden anniversary celebration were finallysettled. Reservations would be made for five rooms at the Ritz Carlton inLaguna Niguel and for ten seats at the Laguna Pageant of the Masters. It was earlyApril and the celebration was not until the end of July, so naturally I had a realsense of organizational pride for having whipped the plans into shape so early.

Half an hour later, my secretary reported the bad news: both the hotel andthe festival were “sold out.”

In my heart, I knew there had to be unsold tickets and rooms. After all,what would happen if the President and First Lady suddenly hit town?

Panicking, I picked up the phone and detailed my 50th anniversary plightto Ellen and Loretta, the two ladies who had firmly—but categorically—rejectedmy secretary’s request. Explaining how my folks had spent months consideringthe very best and most meaningful way to celebrate this special event, I askedeach lady for her help.

Abracadabra is a magic word. Please is not. Please is a polite word. Like abreast-pocket handkerchief, please has no real purpose other than gentrification.Help, on the other hand, is a magic word. Remember how you felt the last timeyou gave elaborate directions or tips to a stranger? People just love to be asked forhelp. Help is the word that gets the results because it is an involvement word.

Did I give Ellen and Loretta too much detail, considering they weren’trelated by blood or marriage? Yes. And it was all on purpose. I wanted theirinvolvement. I wanted to talk to a person, not a cordial functionary.

Loretta (at the Masters pageant) somehow found 10 incredible house seats.Within a half hour, Ellen (from the Ritz Carlton) called back: all five rooms werereserved.


Why were Ellen and Loretta so willing to help a stranger on the telephonewhen so many before me had fallen and failed?

Because I was a little less of a stranger than all of the others, including thosewho had gone to the box office in person.

And because of the equally simple reality that persuasion is more a function ofinvolvement than it is a function of cajoling, hands-and-knees pleading, or saying “please.”

Then there were those difficult men and their flying machines….My usual fantasy that a computer miracle would have me heading into the

wild blue yonder seated next to Cher or Streisand had already been aban-doned. For this flight, I would have been thrilled to be sitting next to a chattyspinster with chronic sniffles.

You see, when I reached my departure gate, I was informed that my Phoenix-to-Los Angeles flight had been overbooked. I was one of seven instructed towait while the plane was checked for any possible unoccupied seats.

The results were in.Lo and behold. There was one seat left.Who amongst our number would be the blessed one?One of our anxious group must have been an engineer or systems analyst.

He had an argument that was based on deliberated logic: His reservation wasreconfirmed only yesterday. The gate manager had her own logic: “A reserva-tion is not a seat.”

The other five were heavy-handed: argumentative, abusive, threatening.Theirs was the “logic” of the screeching wheel.

My move was neither logical nor boisterous. I knew that I needed theinvolvement of the gate manager if I was to reach Los Angeles on time.

To personalize, involve, and set the proper climate and mood, I sympa-thized with her dilemma, for which she was very appreciative. Explaining that Ihad an important meeting back at my office in just a few hours, I asked for herhelp. A few very sketchy details were supplied so she in turn would somehowfeel real involvement with my dilemma.

When the others weren’t looking, I was whisked to the waiting plane and asimple reality was again proven to be true: Persuasiveness is more a function ofinvolvement than it is logic or abuse.

267

Salary, Beginning

After a Job Offer:

Negotiating Your Starting Compensation

The human race is faced with a cruel choice: work or daytime television.

Step 1. Get a Grip on Reality

The salary you need or want isn’t important. What is important is what theemployer perceives as reasonable. Sourcing information is readily available fromformer and present employees, headhunters, and people in the business.

Step 2. Edit Your Wish List

Have a 12-point wish list? Forget it. It’s too much baggage. Be prepared tofocus your discussion on those compensation components that are most im-portant to you.

Some compensation components for selective consideration might be:amount of vacation time, reimbursement of moving expenses, classes, stockoptions, bonuses, merger and acquisition protection, longevity created by abinding employment contract, elimination of noncompete clauses upon termi-nation, and guaranteed promotion.

Step 3. Be Prepared for the Killer Questions

Killer Question No. 1: “What is your present [or last] salary?” If you wereundercompensated, be prepared to sidestep disclosing your previous salary.

Killer Question No. 2: “What are your salary expectations?” Don’t throw outthe first number. It will put you at a negotiating disadvantage:

If you make a wishy-washy proposal—I think something around $______ wouldbe fair—you may come across as a pushover.


A specific number is an announced position. You will lose face retreatingfrom that announced position if your number is not accepted. Even worse, anoverreaching number may leave a bad taste in your employer’s mouth.

Come in with a low number, and you may appear desperate, weak, orlacking in the capabilities you professed to land the job.

Here is how to avoid the dilemma when asked your salary expectations.Test the waters: I believe that my skills and experience place me within the salary

range the company has budgeted for the position.Say nothing.It will be tough, but avoid the temptation to break the silence.Yes, it may seem like an eternity. But wait 10 seconds or so for the em-

ployer to disclose the salary range. Ideally, the silence will be broken by theemployer’s tipping her or his hand. If it doesn’t happen, ask, What is the rangeyou have budgeted?

Once disclosed, ask, How would you place me with that salary range?

Step 4. Back Away From a Can’t-Win Battle

The employer’s range may not meet your expectations.You have two fallback options.Fallback Option No. 1: You can indicate you were expecting a higher num-

ber: I am disappointed. For someone with my ability and experience, I feel that a salaryin the range of $_____ would be fair.

By expressing disappointment, you are being neither judgmental nor threat-ening. You are merely conveying how you feel. The word range suggests thatyour proposal (which has been disguised as an expression of how you feel) isnot cast in stone and sends the message that you expect nothing more thanwhat is reasonable.

Fallback Option No. 2: Propose a performance-based pay package that in-cludes, in addition to a base salary, financial incentives and bonuses that are paidonly as agreed-on benchmarks are reached.

That alternative will be hard for the employer to turn down. Performancebenchmarks can be keyed on your own performance, that of your depart-ment, or the company as a whole. They can be tied to sales, cost savings, orother goals that you are being hired to help achieve.

Be creative, be flexible: If the employer won’t budge on one compensationcomponent, introduce an alternative component.

Step 5. Negotiate How Your Next Raise

Can Best Be Maximized

You can’t play the game without knowing the ground rules. Ask for specificraise criteria. Consider writing a memo to your employer reiterating and confirm-ing those criteria.

Salary, Beginning 269

Negotiate an early review to determine whether you are on track in fulfill-ing the criteria.

Step 6. Negotiate a Training Program

The more your employer has invested in you, the greater the inertia toretain you. Besides, better-trained employees are more valuable.

Employers prefer employees who have a broad-based work perspective.Negotiate cross-training opportunities that will give you a broader skill and knowl-edge range.

Steps 7 Through 10

These steps are the same as Steps 6 through 9 in the next section, “Salary,Increases in.”

270

Salary, Increases in

Negotiating the Best Possible Raise

While Enhancing Your Job Security

A job is the ultimate invasion of your privacy and you should be compensatedaccordingly.

Step 1. Consider the What

Think it out: Will you ask for the raise you think you can get? Or the raiseyou want? Is it better to ask for more money? Increased perks? A trainingprogram? The security of a contract?

Step 2. Phrase Your Raise Request Assertively,

Not Aggressively

Don’t just ask “for a raise.” Be prepared to make your request clear andspecific—dollars, perks, benefits. Casting your raise request as an “or else” alterna-tive will make retreating without loss of face difficult if your request is denied.

Step 3. State Why You Are Asking For a Raise

Your why can’t be:• I deserve it.

Reason: Everyone feels they are worth more.• I need to buy a new car and my daughter needs braces.

Reason: Raises aren’t doled out because things are tight athome.

• My friend at another company does the same thing 1 do but is paid a lotmore.

Salary, Increases in 271

Reason: Employers aren’t in the business of helping you keep upwith your friends.

Perhaps the why is:• Your creativity has been stifled by the badgering of creditors who

could be paid with a raise.• A raise would enable you to quit a second job and be even more

productive.• Your job calls for putting in more hours now than ever before.

Your employer’s business is downsizing, which may mean thatmore work will be expected from you.

Demonstrate that your request has been well thought out: offer your em-ployer something in writing.

Remember those extra hours and weekends at the office? Great. Includeany detail you can recall. Quantify those hours by translating them into a spe-cific dollar request: 10 percent more work equals 10 percent more money.

Are creativity and imaginative new ideas an important part of the job?Throw in a brief description of your recent contributions.

Practice Tip: To get a raise you have to tell. Yes, even if its bragging. You wantyour boss to be aware of your accomplishments and commitment. Keep afile of your accomplishments. Keep a log of complimentary comments,better yet, ask for them in writing.

If you want a raise you have to ask.Why not wait for your employer to make a salary proposal? It’s a judgment call.Once made, your employer’s proposal becomes a psychological barrier, an

announced negotiating position. A retreat from a negotiating position representsa loss of authority. Employers back away from announced positions grudgingly.

Step 4. Couple the Whys

Make one of the whys the escalating cost of living and the diminishing spend-ing power of the dollar. The U.S. Bureau of Labor Statistics has a specific cost-of-living percentage increase applicable to your geographic area. If the cost of livinghas gone up 3 percent, then explain why 3 percent more should be tackedonto your request.

Step 5. Anticipate a Bad-News Response

Keep your cool.You know it’s coming: Income is down, things are tight. The choice is yours.

Be prepared to walk (now is a good time to assess your negotiating leverage) orbe prepared to negotiate the assumption of new responsibilities and a win—winformulaic bonus:

Boss: I hope you are not serious. Everybody knows how tight things areright now. I promise you there aren’t any raises in the new budget.


If both the job and the working relationship with the boss are to be pre-served, an argument must be avoided. Linkage and alignment tactics must bebrought into play if you are to go back to your desk a winner.

Employee: You are right. We have to stay competitive, which means operat-ing leaner. And I know you have our collective best interests in mind. I amnot asking for a raise given what’s happening with our department’s budget.Boss: What is it you want then?Employee: Sometime soon, when it’s best for you, I would like to talkabout what you think of my job performance, the ways you think I couldimprove, and what I could reasonably anticipate later.

It has been acknowledged that the company is not perceived as being greedyor overreaching. The further acknowledgment—that it is looking out foreveryone’s best interests—encourages the boss to adopt a pattern of fair dealingwith the compensation issue. A mutually tense situation has been eased. At thenext meeting, the boss no longer has to be defensive. No one is taking moneyout of the budget. The agenda for that meeting has been cast as positive: howthe employee can do better for the company.

Employee: Thanks for meeting with me so soon. Let me tell you aboutsome of the things I would like to accomplish for us this year. [Explanationfollows.] I have given a great deal of thought to our tight budget and think Icould help by taking on added responsibilities that would save us money.

Discussing job goals reinforces the employee’s value and importance to thecompany.

To energize discussions, maintain a positive environment, and capture theboss’s interest, the dialogue has been focused on how the company’s need forcost reduction can be satisfied.

The reference to our budget and us gives a sense of mutuality to the dilemma—a sense that should carry over in the quest for a solution.

The turned-down-raise issue has been judiciously avoided. But it is about to berevisited—not as a negative request for a budget-wrenching raise, but as a positivecost-savings opportunity. “Added responsibilities” are a value-added plus.

Employee: If I can take on [description] responsibilities, which will save usmoney, then maybe there is a way for me to be compensated out of thosesavings. What do you think about a formula bonus—I would only receivemore if I could free up funds through my cost-cutting efforts?

There is an irrefutable logic in the proposal. It’s a no-lose proposition. Askingthe boss for input prompts both the boss’s involvement and further dialogue.

Step 6. Negotiate Your Long-Term Company Career Path

Negotiate regular reviews to make sure you are on course. Does that up-ward path look like an uphill battle? Negotiate a different position within thecompany, where the ascent will be less challenging.

Salary, Increases in 273

Step 7. Lock In Your Negotiating Destiny

Bosses go to expensive seminars where they are told to hire people whoare smarter than they are. The more dependent your employer is on you, themore likely you will get raises and promotions. Negotiating leverage increasesdramatically as dependency is developed through unique technological knowl-edge, close rapport with important customers, being your boss’s trusted confi-dant and sounding board, gaining a special know-how, having the ability to cutthrough red tape, and so on.

Step 8. Lay the Negotiating Groundwork

for Your Next Review

Keep a diary of those extra hours and weekends at the office, and note anycontributions and accomplishments that were of significant benefit.

Step 9. Understand the Inner Company

Future negotiations will be even more fruitful if you understand the per-sonal attributes that your company considers most important. They might in-clude: a high profile in the community, sensitivity to cost-cutting opportunities,marketing savvy, the ability to take direction, the ability to lead, a polished per-sonal style. (One client invites employees to dinner to check out their tablemanners and ability to make small talk.)

Steps 10 and 11.

These steps are the same as Steps 5 and 6 in the previous section, “Salary,Beginning.”

274

Store Front Lease

Negotiating a Store Front Lease

Before signing a lease, be a bit afraid. Fools rush in where wise men fear to trade.

Step 1. Know Exactly What You Are Being Offered

Is the building in compliance with all applicable safety and building ordi-nances, codes, and regulations relative to your type of business?

Are plumbing, electrical, mechanical, heating, air conditioning, and otherbuilding systems in good repair and condition?

Is the roof watertight and in good repair?Are the structural elements of the building sound, including walls and

foundation?If you skip a thorough, professional physical inspection and don’t check with

applicable governmental authority for potential code problems or recent citations,how will you know what needs you should be addressing in your negotiations?

Step 2. Negotiate Repair and Replacement Responsibility

SG’s store was a boutique just off glitzy Rodeo Drive. The lease provided that theair-conditioning unit was SG’s responsibility. If the unit couldn’t be repaired, it was SG’sobligation to replace it with a comparable new unit. In the 57th month of a 60-monthlease, the air conditioner breathed its last sigh.

Heating, air conditioning, plumbing, electrical systems, and the building’sroof have to be someone’s responsibility, but they don’t have to be yours.

Negotiate that all repairs, except those caused by your own negligence, willbe at the landlord’s expense.

The landlord won’t go for it? Consider negotiating one of these alternatives:

Store Front Lease 275

• Landlord repair responsibility for a designated period (for example,the first year).

• Landlord responsibility for any repair in excess of X dollars.• Limiting your responsibility for expensive replacements or major

repairs (which can be defined as replacements or repairs in ex-cess of X dollars) to the proportionate part of the cost that youwill be “using.” For example, if the life of the air-conditioning unitis 72 months and you will be a tenant for just three more months,your part of the replacement obligation, if the air conditioner diesnow, should be no more than 3/72 of the air conditioner’s cost.

Step 3. Negotiate Responsibility Required by Code Changes

HR’s business occupied a free-standing building on Sunset Boulevard. HR’s leaseprovided that any repair or alteration necessary to keep the building in code compliancewould be HR’s responsibility. A new earthquake preparedness code mandated the rein-forcement of the building’s structural walls. The cost of HR’s compliance with the leaseobligation was more than a year’s rent.

There is a good chance that new building ordinances or codes will be en-acted sometime during your lease term. Special-access restrooms, handicapaccess ramps, reinforcement of exterior walls or roof, and sprinkler systems areamong the possibilities.

Negotiate that the premises will be delivered to you in compliance with allgovernmental authority and, except for improvements owned by the tenant,will be kept in full compliance by the landlord.

Step 4. Negotiate Signage Rights

MF was a third-floor tenant of a fashionable Westside shopping center. MF as-sumed that because other tenants had ground-floor signage facing the street, he toowould enjoy comparable signage prominence. MF was wrong.

Determine local signage prohibitions. Negotiate the most signage the land-lord and the law will allow. You may not want to exercise all of your signagerights, but the rights will be in place if your signage needs change.

Practice tip: An abundance of signage rights may not be important to yourbusiness but may be critical to a potential subtenant.

Step 5. Negotiate the Right to Remove Your Fixtures

The French restaurateurs invested mega dollars in kitchen fixtures, dining-roomchandeliers, mirrors, and the most beautiful bar in town. After 10 years, the decisionwas made to relocate the restaurant and to unscrew, detach, and relocate their expen-sive fixtures and decor items. The landlord said no.

State law varies, but most leases provide that once fixtures, equipment,mirrors, shelves, or other tenant improvements are screwed, nailed, or attached


to a floor, wall, or ceiling, they become property of the landlord. Negotiate theright to remove your fixtures and equipment at the end of the lease term.

Step 6. Negotiate a Nondisturbance Agreement

DM and his partners invested $500,000 in building out the prototype store ofwhat DM hoped would be a chain. Ten months later, DM’s landlord lost the building inforeclosure. The new owner canceled DM’s lease.

Does your landlord have a real estate mortgage encumbering the storebuilding?

In the event of foreclosure by the landlord’s lender, your lease may becanceled and you could lose the benefit of your investment in improvementsand neighborhood goodwill.

When a lender signs a nondisturbance agreement, the lender is promisingthat, in the event of foreclosure, all the terms and conditions of your lease willstill be honored.

Negotiate as part of your lease that the landlord will supply you with itspresent and future lender’s nondisturbance agreement.

Practice alert: Does your lease have a subrogation clause? If so, you may beallowing a subsequent lender to have certain rights superior to yours as anexisting tenant. Agree to subrogation only if a new lender will be obligatedto honor your lease.

Step 7. Negotiate How Overages Will Be Determined

WR’s barbecue restaurant’s success was largely due to its incredible sauce. A fooddistributor offered to take the sauce to grocery shelves all over the state. WR’s landlordclaims he too is entitled to a piece of the sauce profits.

Is your rent a base (or minimum) against a percentage of your gross sales? Ifso, when the applicable percentage of sales exceeds the base rent, the differ-ence owed the landlord is the overage.

Negotiate items to be excluded from the calculation of gross sales: postage;returns; sales off the store premises (fairs, bazaars, catering); catalog or mail-order sales; delivery charges; sales of fixtures not part of the store’s regularmerchandise; sales, luxury, or similar taxes; returned merchandise; sums re-ceived in settlement for loss or damage to merchandise.

Step 8. Negotiate When Overages Will Be Determined

Linda owns a small gift store. Her rent is 5 percent of her monthly gross sales,with a base guaranty of $1,000 per month. Fifty percent of Linda’s business is inDecember. Her December sales were $150,000. Linda’s landlord is claiming $6,500overage rent in addition to the $1,000 base rent.

Is your flow of business seasonal or uneven? Negotiate whether your over-age will be calculated monthly, quarterly, or annually.

Store Front Lease 277

If, like Linda, most of your sales are during the Christmas holidays, youwould not want to pay December overage against your base December rent. Inthis example, negotiate to determine the overage by comparing 5 percent ofannual (rather than monthly) gross sales to the annual base guarantee ($12,000).

Tip: Review the “Office Lease” Section of this Playbook. It will be largelyapplicable to your store front lease.

If your store will be in a multi-store commercial complex, pay special atten-tion to these final steps.

Step 9. Negotiate Exclusivity

Tim had a small sporting goods store in the Marina shopping center. A popularsports shoe chain opened a store in the same center. A year later, Tim filed bankruptcy.

Negotiate that your store will be the only yogurt store, or dry cleaner, orsporting equipment store in the complex.

Practice alert: If your lease limits you to being a particular type of store, youmay not be able to change businesses or sublease to a business differentfrom your own if things don’t work out as planned.

Step 10. Negotiate Special Security Needs

If your store “keeps evening hours” and is in a commercial complex, nego-tiate to have your special security needs paid by the landlord.

Step 11. Negotiate Rent That Fluctuates

With the Complex’s Vacancy Factor

John’s business was instant shoe repair—heels and soles for people on the go. Hisbusiness was to be generated from the mall’s “foot” traffic. Too bad John couldn’t holdout during the three years it took for the mall to become largely occupied.

Will your business base depend on the traffic generated by other businesseswithin the leasing complex?

What happens if it’s a newer complex that is only half full when you movein? You would be deprived of half of your projected customer base.

Negotiate that your rent will be proportionate to the total number of squarefeet actually open for business in the complex each year, compared to thenumber of square feet available for rent.

Step 12. Negotiate Designated Customer Parking Areas

Negotiate to have parking in front of your store “reserved” for your cus-tomers. Specify how the landlord will enforce the exclusivity of this parking.

Practice alert: Larger commercial complexes usually have merchant associa-tions. The association and its advertising programs may be of little or nobenefit to your type of business. Determine whether participation is man-datory. If you join, what will be the basis for your assessment by the associa-tion: Gross sales? Store footage? Net profits?

279

Coming Full Circle

The soft-touch/hard-bargain methodology of the persuasion progressionhas come full circle. How to Win Any Negotiation ends the same way Chapter1 begins.

“Being a winner is not what you do but what you are. By being, you willbecome.”

Robert Mayer presents negotiating and persuasion workshops for busi-nesses and groups.

For information visit www.TheWayToWin.net.

www.TheWayToWin.net

281

Index

Aadjuster delays, don’t allow, 222advertising, 202-203affinity groups, 181agent, special, 226aggression, hostility, and anger,

finessing, 53agreement in principle, reach, 174agreement,

nondisturbance, 276shaping a pattern, 27-28

alert,negotiating, 190, 232practice, 182

alignment, 25-28allowances, negotiate shipboard, 183-184amnesty, negotiate a partial, 230analytic, choice point, 89analytics, 79-82apartment leases, 129-131

and making good impressions, 129lower rent, 129

appliances, 132-134application, the art of, 103

assistance,financing, 201managerial, 203

auction negotiating, 114audit negotiating tips, 225-228audits, 203aura, create a positive, 22auto insurance

claims, 214-218policy requirements, 214

automobile lease, 135-139automobile,

new, 140-144used, 145-147

Bbandit, gentleman, 80Barbara effect, the, 13bargaining

and haggling, 148-151basic training, 93-102baubles, tiny, 231beginning salary, 267-269betterment


and depreciation, negotiate, 215issues, negotiate, 223

bid price, clarify the, 142billing, clear and frequent, 243bond, negotiate a completion, 172broker, do you want a, 205-206brokers, real estate and listing, 263-264budget ceiling, build a, 149business

purchase, 152-156sale, 157-160

Ccabin upgrade, negotiate a, 183cancellation penalties, 229car loan, negotiate a great, 143car rental, 216carve outs, 153cash, discount for paying, 134cerebral foreplay, engage in, 19-20change, negotiate a right of, 131channeling, 35-36CID, 226, 229circling the wagons, 115clause, negotiate a “stockyard,” 176code changes, negotiate responsibility

required by, 275cohabitation agreement, 161-163collecting money, 164-167

and bad moves, 165collection offers, 227communicating with family and friends, 196competition, play on the power of,

142-143competitor, the seller becomes, 154“comps” ask the broker for, 207concern, demonstrate, 178-179conditions game, the terms and, 97-98conduct, standards of, 202consolidator game, the, 181containment versus control, 178

content losses, negotiate, 221-222contract is standard, no, 211contract, 174-176

considered whether to negotiate anemployment, 194

insist on a detailed, 169contractor’s trilogy, the, 85contractors, 168-173

what to ask all, 220what to ask restoration, 220

control, 33control versus containment, 178coopetition, 80-81cost and credits, negotiate, 169-170cost, ask about invoice, 141credit, preserve your future, 188credit-investigation services, 92creditor’s mindset, have a, 164credit-reporting companies, 92credits and costs, negotiate, 169-170Criminal Investigation Division, see CIDcrisis, public relations, 177-179CRP, 137cruises, 180-184Cs, the three, 198-199curse, the winner’s, 93curves, sliders and, 111-120

Ddeadlock buster, 68-70dealer game-playing, avoid, 144Deal-Maker’s Playbook

and having universal applicability, 127death benefits, negotiate, 163death or disability, 203-204debt, 185-188defensive tip, 115, 118-119Deficiency, Notice of, 227delays are costly, 185-186

delivery as the primary, 100delivery as the throw away, 100

delivery lane, 99

Index 283

directory, lawyer, 239discounts and venturing, 149dispute resolution, fast, cheap, and

efficient, 172-173divorce, 189-191dock, eight steps to the, 181-184documentation, negotiation through, 176dog story, a shaggy, 22-23dumb things, 54-56Dun & Bradstreet, 92duty free, 151

Eearn-out manipulation, 159ease your tension, 165effect,

the Barbara, 13the Goldberg, 112

ego has landed, the, 55emotional response and prenuptial

agreement, 259employees, 192-194end-of-lease fees, 139energy, harnessing the other person’s,

26-27equation, the persuasion, 99Equifax, 92escapes and transfers, negotiate a way

out, 137-138Eternal Truths, 43-45evaluation, 39-41evaporating-offer ploy, the, 123excess-wear provisions, negotiate, 137exotic aisles, 150-151expectations, managing, 64Experian, 92extended-warranty premium, 143externalization tactic, 146-147

Ffactory outlets, 151family and friends, 195-197fare, negotiate a super, 182

favored-nations negotiation, 175Federal Trade Commission, 199fees,

end-of-lease fees, 139royalty, 202

field audit, 225finance lane 99financing assistance, 201finders keepers, 39fine print, read the, 139fish in a teacup versus pond, 101fixtures, right to remove your, 275fleet, go to, 141Foot Locker, 152force of logic, 107foreplay, engage in cerebral, 19-20

foreplay, engage in, 148-149franchise agreement, 200franchisees, talk to former, 200franchisors, 198-204

and issues to consider, 201-204friends and family, 195-197

Ggame,

preferred-account, 180-181the consolidator, 181the terms and conditions, 97-98

game-playing, avoid dealer, 144gap insurance, negotiate, 138gentleman bandit, 80Gidget Gambit, The, 119give-and-take, the take on, 100goal attainment, a sense of, 30Goldberg effect, the, 112Greece, architecture of, 91groups, cruise affinity, 181gullible’s travels, 108

Hhaggling and bargaining, 148-151hesitation and loss in collection, 164


high-comfort level, 21holdbacks, ask about, 141Home Depot, The, 152homeowner insurance claims, 219-224hook, getting off the, 158-159hostility, aggression, and anger, 53house as machine, 208house,

purchasing a, 205-210sale, 211-213

Iimpressions, making good, 129incentives, ask about , 141injured, signing releases if, 217insurance claims,

auto, 214-218homeowner, 219-224

insurance, gap, 138interest rates, 249-250Internal Revenue Service, see IRSintimidated, don’t be, 215involvement, create, 22IRS, 225-230IRS, negotiate with the, 229issues, tackle nonmonetary, 174

Jjeweler, 233jewelry, 231-234job interviews, 235-238

LLANCER, 18, 19, 23, 25, 28, 29, 32, 33,

37, 39, 41, 43, 47, 49, 50lane,

delivery, 99finance, 99risks, 99

lawyer and cohabitation, 163lawyer, hiring a, 239-243lawyers and mediated negotiations, 190-191lawyers, interviewing several, 240

lease,apartment, 129-131automobile, 135-139office, 253-258store front, 274-277

lease-extension option, negotiate a, 138leases

and managers, 131and negotiation, 130

leasing company, consider theautomobile, 135liability as a buyer, limit the scope and

extent of your, 158liability, negotiate, 216limited time offer, make a, 209linkage, 19-23lips, unlocking sealed lips, 61-62listening, persuasive, 33-34litigation records, 92litigation, settling, 244-246loan shopping, 248loan, 247-252

lump-sum, 247-248negotiate a great car, 143prequalifying for a, 205

loaners and lemons, 138-139logic of force, 107“Loyd’s of London” tactic, 245lump sum loan, 247-248

Mmachine, house as, 208managerial assistance, 203manger, group, 226mediated negotiation,

advantages of, 189-190and lawyers, 190-191

mediator,placating the, 191selecting a, 190

messages, reading hidden word, 46mind tricks, 103-109minds, unlocking closed, 61-62

Index 285

mindset, winning is a, 17-18missing-man maneuver, 116mistakes, they won’t admit their, 55-56money, collecting, 164-167

and bad moves, 165mortgages, negotiate the terms, 209motivator buttons, repush, 174mutuality, preserving, 191

NNays, Anne of a thousand, 115need,

seller’s convenience-oriented, 207seller’s emotional, 206seller’s psychological, 206

Needs, 29-32read the buyer’s, 212

negotiating, auction, 114negotiation and leases, 130negotiator-friendly resistance pattern, 64NEVER EVERs, 59, 179, 237-238“no comment” responses, 177nondisturbance agreement, 276Notice of Deficiency, 227

Oobjective, determine your primary, 207office lease, 253-258offset, negotiate a right of, 209one-minute hero, be the, 236operation, containment, 54opponent, underwhelm your, 20options, consider your, 130out, negotiate a way, 170-171out-of-towner’s deadline ploy, 122-123overages, 276-277overlawyering, avoid, 242

Pparty time, 31-32pattern, negotiator-friendly resistance, 64pay, avoiding the word, 166

payment,negotiate a progress, 171negotiate the down, 137

payments are bait, low, 135-136penalties,

cancellation, 229negotiate time-schedule, 170

performance, the art of, 103personalize the process, 20-21persuasion equation, the, 99-100ploy,

evaporating offer, 123out-of-towner’s deadline, 123short-fuse deadline, 123

power , 89-92of competition, play of the, 142-143props, 107

practice alert, 173, 182practice tip, 36predicament, the prisoner’s, 84preferred-account game, 180-181prenuptial agreement, 259-262

and death, 261-262and emotional response, 259

prepaid gratuities, negotiate, 183price,

clarify the bid, 142negotiate an automobile selling, 136

prices,asking about best, 132-133don’t be swayed by printed, 132

Principle, The “William L.”, 117-119priorities, reading for, 46-47prioritization tactics, 37procrastination, benefits of, 191products, purchase of, 203promissory note, buyer’s, 159-160proof of loss

claim, prepare a, 220-221forms, 215

props, power, 107public relations, crisis, 177-179


purchase, negotiate a right of, 138purchases of appliances, 132purchases, dialogue of a major, 133

Rraise, why you are asking for, 270-271rapport,

establish, 21tactical, 21

rates, interest, 249-250real estate and listing brokers, 263-264real-property title reports, 92reasonable versus right, 71-75records, litigation, 92refusal, assignments and right of first, 203reimbursement for total loss value, 216

reinforcing, 25-26rejection, overcoming, 57-60relationship, negotiate the character, 162relationships, 83-87relocation, right of, 203renewal, 203rent, lower, 129rental, car, 216repair and restoration, negotiate, 221requirements, auto insurance policy, 214reservations and tickets, 265-266resistance pattern, negotiator-friendly, 64resistance, preventing, 26resolution, dispute, 204retainer agreements, 241-242right

of change, negotiate a, 131of purchase, negotiate a, 138versus reasonable, 71-75

rights and obligations, 162rights, negotiate signage, 275royalty fees, 202

Ssalary,

beginning, 267-269increases in, 270-273

salesperson invest in you, make a, 132sayonara syndrome, 194Scottsdale squeeze play, 212security needs, special, 277self-esteem, a sense of, 30-31sensation, singular, 104separation, negotiate terms of, 193share differences, 67-70shipboard allowances, negotiate, 183-184shore excursions, when to buy, 184short-fuse deadline ploy, the, 123site

development, 202selection, 201-202

sliders and curves, 111-120soar points, 25soft-touch

technique, 62warning, 59

soft touching, 101soul erosion, 108-109Spanish rice principle, 95-96special agent, 226spokesperson, designate a, 178squeezing, slow, 71stealth factor, the, 19-23“stockyard” clause, negotiate a, 176store front lease, 274-277subcontractors, 169suggestion, the power of, 35super fare, negotiate a, 182surprise-proof, make yourself, 171-172surprises, avoid asset purchase, 155-156syndrome, sayonara, 194

Ttactic,

“Loyd’s of London,” 245externalization, 146-147

tactics,low-impact, high-yield low impact, 37

tension, ease your, 165

Index 287

termination, 204negotiating early lease, 131

terms and conditions game, the, 97-98territory, 201tickets and reservations, 265-266time vampires, 122tip

for collecting money, 166defensive, 115, 118-119practice, 36, 92, 94, 97, 160, 167, 229

tips,and tactics, low-impacts, high yield, 127audit negotiating, 225-228negotiating, 191, 201

tips for homeowner insurance claims, 219tips for newly built houses, 209-210title all materials, 173title reports, real-property, 92tough no. 1-4, hanging in, 27-59trade secrets secret, keep, 154-155trade-in, negotiate the value of your, 143training, 202

basic, 93-102traits, reading personality, 45-46trap, the wishful listening, 47traps, bargaining, 150-151tricks,

tricks, and tactics, Low-impact,high-yield, 127

used automobile, 147turkey, soar like a, 104

UUFOC, 199underwhelm your opponent, 20Uniform Franchise Offering Circular, seeUFOCunmarried cohabitants, agreement

between, 161-163upgrade, negotiate a cabin, 183

Vvalue diminution, negotiate, 215-216value of your trade-in, negotiate the, 143value,

negotiate the automobile residual,136-137

value, negotiate total loss, 216worth, and share differences,

finessing, 67-70vampires, time, 122

Wwagons, circling the, 115walking, hit the ground, 20walls, running through, 61-65wanton soup, 105warranties, 152

absolute, 153negotiate, 172

watch, purchasing a fine, 234winner’s curse, the, 93winning is a mindset, 17-18winning odds, those, 98work, negotiating quality of, 168

288

About the Author

Larry King, host of Larry King Live, says that “Bob Mayer is a lawyer’slawyer.” Bob received both his business and law degrees from the Universityof California at Berkeley. A veteran been-there, done-that negotiator, RobertMayer and his firm represent clients big (foreign governments, including Ven-ezuela, for whom the first heavyweight prize fight ever held in South Americawas negotiated) and small, famous (some of America’s best-known actorsand athletes) and infamous, negotiating deals on everything from Amphithe-ater developments to the sale of Zero vintage aircraft.

In addition to being a professional mediator and practicing law full time,Mayer conducts “Negotiating Tips, Tricks, and Tactics” seminars and work-shops that have been presented for M.B.A. and law students and for vari-ous governmental agencies, private businesses, trade groups, and professionalassociations.

Mayer has interviewed over 200 of the world’s negotiating masters—thelegendary street and bazaar merchants of Bombay, Istanbul, Cairo, andShanghai—gathering bargaining, haggling, and horse-trading tips for travelersheaded for marketplaces around the world. When he can get away, he is apopular cruise ship lecturer who shares those secrets in light-hearted talks tocruise ship passengers bound for destinations where a marketplace mentalityis a must to be a top-seeded shopper.

For more information, log onto Bob Mayer’s website,www.TheWayToWin.Net.

www.TheWayToWin.Net

portions of this book were previously published in 1996 by random

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